Thursday, October 1, 2009

Raising money in 2009: Are banks lending to small business?

I am going to start a new topic here on the blog along the lines of small business development and funding.

Its always hard to run a small business. Right now, it can be really hard. But that doesn't stop owners from still trying to take on new challenges, establish new markets, and continue the pursuit of growth for their companies.

We're an example of that. I've run Silverado since 2003 as a fairly organic organization--we've generally bootstrapped most of what we do from the very beginning. We do a number of very high-profile things--and we do them very well.

First, we design high-definition editing systems for film, media, broadcast, and independent editors using Apple and Assimilate technology. One of our largest projects included redesigning the TV editing facility at NASA's Goddard Space Flight Center around Apple technology.

Another project includes high-end film finishing software. If you are planning to see Disney's "A Christmas Carol" in 3D later this year, that movie was finished on our editing systems using a product called SCRATCH from Assimilate.

Secondly, we've been at the forefront of helping to transform cinema production with the acquisition of two of the first RED ONE cameras in the world. The RED ONE can shoot in a format called 4K--which is akin to 35mm film grade material created digitally. It is actually a very green process since there is no film development, no chemicals, no processing, and no transporting material back and forth to labs.

We work on this 4K material in our new 5000 sq. foot Silverado Studios facility in Folsom which currently has one fully operational digital cinema editing suite along with two more edit suites and an advanced 4K digital cinema theater in development.

Did you see Lois Wolk's iPhone style-ad during the last election? Shot on our RED cameras and edited at Silverado.

Did you see Cathleen Galgiani's bullet train spots? Shot on our RED's and edited by Silverado personnel.

Our cameras and personnel have shot three full-length feature films including acting personnel such as Jennifer Love Hewitt, Jamie Kennedy, Robert Picardo, and Cybill Shepherd. Our studios also hosted the editorial of the critically acclaimed Timothy Hutton feature film "Broken Hill."

For better--and worse--we've worked pretty much with the existing cash flow of the business instead of taking venture capital, angel funding, or SBA loans. We've used our own resources plus those of a few family and friends along with a local bank for a small credit line which is no longer available.

Because of that, we've been restricted in growth to what we could accommodate on our own. In spite of those restrictions, we've been awarded the following accolades along the way:

2007 "100 Fastest Growing Companies in Sacramento" - Sacramento Business Journal
2008 "100 Fastest Growing Companies in Sacramento" - Sacramento Business Journal
2009 "100 Fastest Growing Companies in Sacramento" - Sacramento Business Journal

2008 "Top 5000 Fastest Growing Private Companies in America" - Inc. Magazine
2009 "Top 5000 Fastest Growing Private Companies in America" - Inc. Magazine

Presently, we're poised to take on a new project in the immediate future which will require outside funding for the first year. The details are under wraps right now (my competitors like to read my blog) but will come out fairly soon. The crux of the matter is that this project will take $850,000 in excess of what we currently have. This new operation will allow Silverado to become a $10M company in about 18 months.

With that in mind, I need a loan. But are banks lending?

My position is that they are not lending. But rather than hem-and-haw about the situation, I intend to determine for myself if banks aren't lending to small business.

The following banks will get a loan application from Silverado Systems, Inc. in the next two weeks:

Sierra Vista Bank
Folsom Lake Bank
First Northern Bank
IronStone Bank
Bank of America ($25,000,000,000 in TARP funding)
Wells Fargo Bank ($25,000,000,000 in TARP funding)
Five Star Bank
Umpqua Bank ($214,181,000 in TARP funding)
River City Bank
California Bank & Trust
California Federal Bank
Imperial Bank
Sacramento Commerce Bank
Sonoma National Bank
Western Sierra Bank
Mechanics Bank
Comerica Bank ($2,250,000,000 in TARP funding)
Tri Counties Bank
Stockmans Bank
American River Bank
Bridge Bank
First US Community Credit Union

Our criteria is the following:

1. We need a loan of $850,000 for a business expansion project that will significantly increase Silverado sales on a national basis.
2. We will move all deposit accounts to the loaning institution.
3. If such service is offered, we will move our credit card processing over to the loaning institution.

We will report the results from every single bank right here on this blog. Either "yay" or "nay."

This isn't designed to be antagonistic, but other business owners are in the same shoes as we are right now--trying to expand their business, but not having much luck getting funding. Plus, a lot of people want to know what is being done with their taxes. When a bank gets a bailout, are they loaning back to the community?

If there are any banks not listed that you think should get an app, please let me know. Our criteria for applying to a bank is whether they have a strong business loan track record.

Note--while this might be a noble experiment conducted for the benefit of ourselves and other Sacramento area small businesses, I am a businessman first. If a private investor walked in the door with $850,000, we'd proceed with our business project immediately. If you're in that position, I can always be reached at torrey@silverado.cc

However, private capital being in the condition that it is today--I don't know if that is plausible. So, we are proceeding with the traditional loan process.

If you are a lending institution that would like to be considered for an application, please contact us at (916) 760-0032.

Further--we'd love to accommodate a tour of our facility. Please call us and schedule a time to visit. We would love to show you around the studio and we can talk about our expansion plans in greater detail.

Stay tuned to this blog for the results.

8 comments:

Chris said...

I think your experiment is interesting, but somewhat disingenuous. If the public has a right to know if banks are lending they also have a right to know the criteria by which these banks are being judged, namely you and your company's financial information. Your financial information should be made available to the general public as should the banks' credit policy and underwriting criteria. Credit policies vary from bank to bank so a general broad stroke is not adequate. You have to clearly demonstrate how your company specifically met or did not meet the criteria of each lending institution to which you submitted an application. The burden of proof is on you and your company, not the banks. Being a recipient of TARP money is not a mandate to lend and, even if it was, I'd want to know that my money was being lent to a business that had a demonstrable ability to repay the debt. Simply having an impressive resume, clients, and/or equipment doesn't qualify you for a loan. Neither does time in business or accolades received.

Anonymous said...

You should also send a loan request to Community 1st Bank in Auburn (also ibn Roseville), another TARP Bank!

Craig said...

Let me know how you make out. If you have problems, let me know. I don't know alot about your business, but I have over 25 years' commercial lending experience. I can help. E-mail me.

Anonymous said...

I am a client of one of those banks. I believe TARP money is being used to cover loan losses by the banks - not to make new loans.

Anonymous said...

Why don't you post your finanical statements so the readers can see what the Banks are basing thier decisions on?

Anonymous said...

California Federal Bank isn't around anymore. It was swallowed up by Citibank back in 2002.

Amber said...

I look forward to hearing the results of your experiment and hope you get the financing you need. I always tell people that lending is simply, "What would you want to know about someone if you were going to lend them $850,000?" I have worked in commercial and residential real estate lending for 8 or 9 years, not sales, underwriting and credit qualifying. It's my understanding that decisions are based on personal and business credit, historical cash flow (can the business pay the new loan based on historical averages?) and collateral. Collateral can be anything from commercial, residential real estate, and/or business assets. Working capital, balance sheet and income statement ratios are also a factor. Check out SBA's 7A loan program, that may be up your alley! Although I don't think you should make your financial information public, having a qualified outside individual look at your financial stuff maybe in your best interest. The one thing to always remember about lending, this industry is driven by the sales force, and communication from the sales team to the credit underwriter (the people who actually process and approve the loan) can be an issue. Should you find a lender, it may be interesting to continue the experiment to see what issues arise during the process from what you were told originally.
Should you need a neutral, third-party, I audit residential real estate loans from home in Folsom, and would be happy to help. Otherwise, good luck!!

Anonymous said...

Your blog keeps getting better and better! Your older articles are not as good as newer ones you have a lot more creativity and originality now keep it up!