As we ring in the new year, it is often a time for reflection of both the good and bad from the past twelve months. Often, this leads us to making resolutions that will have us eating healthier, spending more quality time with family, losing that extra ten pounds, or maybe finishing the half marathon. It is in this spirit, I offer some business lending resolutions for your institutions.
I am resolved to review and change my loan policy and procedures this year. Believe it or not, we still see CUs who have not made changes to their MBL policy for several years. The changes in the regulations that went into effect last January, require a universal rewrite of all policies and procedures. If you have rewritten your policy, then you still need to review this annually for changes. If you need help, contact us.
I am resolved to set goals for my business lending department that is in alignment with the overall direction of my CU. Some institutions operate without any concrete goals or vision for their business lending department, choosing to allow that area of the CU just take care of small requests that come in from the membership. As such, the MBL departments do not exist as a primary driver of relationships and revenue. Set an overall vision for what you want commercial and agricultural lending to do for you and set some reasonable and some “stretch” goals for the year.
I am resolved that once my goals are set and communicated throughout my team, that I will not deviate from them unless there is a strong, compelling reason that will be communicated. I once worked in the bank that was notorious for changing the incentive plan each quarter. It became a joke as we knew we would do our best and could reach the goals that were in place for the last quarter, just to find the bar moved for this quarter. Actions like this cause distrust and do not encourage team members to excel.
There are circumstances where goals need to be moved considering a more pressing goal. I experienced this with the crash of 2008. Our commercial team moved from aggressive pursuance of new deals and relationships to managing and monitoring all credits. We have seen this with some of our CUs that have members who have been racked with the crash of commodity prices in the past few years as they turn inward to help the relationships they have march through these times as opposed to adding new business.
I am resolved to make sure any incentive program I have for my lenders lines up with the overall goals for the CU. If you have your number one focus as asset quality, then incentive plans need to have some measurement of that. If you want growth, do how you reward your team members reflect those goals?
I am resolved to not turn away large deals just because it is over my lending limit or comfort zone. We see CUs who have great opportunities dropped in their lap who will pass on it because of the size or complexity. A few years ago, we had a small CU we work with turn down a request from a member to finance a newly built Dollar General store because of the size. This would have been a great opportunity with a credit tenant as the primary source of revenue behind the project. This is a participation we could have managed which would give other CUs an opportunity to take a part in.
I am resolved to make sure all farm operational loans contain a thorough budget. I once financed a rancher who would sit at my desk and write out his annual budget on a piece of notebook paper each year. Most of the time, he was pretty spot on with his projections. Though I would have preferred something on a spreadsheet, I did appreciate the accuracy. Too many times, we see an operating farm loan, or even a C&I loan, that does not have any budget behind it. This makes it hard to know if the operating loan is sufficient for the needs of the farm. Operating budgets also show the management ability of the farmer. If you need help, we have a budget template on our website.
I am resolved to review financial information the customer gives me instead of just sticking it in the file. Are you just checking off the box when you receive something or are you reviewing this to see what the financial information tells you? Commercial lending requires that you exercise thought and judgement whenever you receive anything that needs to go in the loan file.
I am resolved to clean out my files and get rid of old, obsolete information. First, make sure that you are following all guidelines for file retainage. I had a wonderful president of a bank I worked for who required everyone to take a half day to a day every January to organize and purge files from unnecessary information. I have found that practice valuable as we work to stay organized.
I am resolved that everyone on my team has appropriate training and education. Learning is continuous; you never reach full knowledge. We set a minimum number of education hours for each Pactola team member at forty. Each of us, including myself, will exceed this by at least two times. Start a log of staff training and then look for opportunities, schools, continuing education, seminars, webexes, or classes we hold, to meet that ongoing need.
I am resolved to work hard on loans at the first stage of problems instead of burying my head in the sand. I have been guilty of the situation as described in a Peanuts cartoon. Linus asked, “Charlie Brown, when you have a problem do you think you should fix it right away or spend time thinking about it?”
“Oh, thinking about it, definitely” replied Charlie Brown.
Linus pressed in further, “To give you time to make the best decision on how to fix the problem?”
“No to give it time to go away!” Too often I have become as Charlie Brown and hoped the problem would disappear. Sometimes it does, but more than often it does not. It only gets worse. Arrest problems in the early stages, even if these are painful to deal with and you will be rewarded.
I am resolved to make sure my loan files are all up to date. This is a struggle when you have non-cooperative borrowers. But a lack of information in the file equals not fully understanding what is going on with the borrower. Serious problems may be occurring and you have no knowledge of these until it is too late. Resolve to correct this problem even if you think all is OK and that you have a “great member who has high standing in the community” as the borrower or guarantor.
I am resolved to grow. It is time that CUs who have business departments to become known as a resource for commercial and agricultural lending in their communities. You want to become the first choice of a business borrower and not the last.
So, there are twelve resolutions worth making for the new year. Find ways to reward yourself and your team for little accomplishments along the way. Develop a strategy to help you move from where you are today to where you want to be. And, contact us to help you excel in your resolutions.