You have just completed either your PPP or EIDL application through the bank or the SBA. Think you’re done with your financing options for the next 6-9 months? Think again. You’ll still need access to debt capital – but there will be no guarantees that your bank will welcome you with open arms.
What is Loan Packaging?
Mark started loan packaging in the early 2000s before he knew what that term even meant. But he learned some valuable insights after each loan was approved by his client’s lenders. That’s the topic between Bruce and Mark on this week’s CFO Bookshelf podcast.
Relevant Show Notes
Mark’s Rant
Bruce learns why Mark says these business headlines continue to dumb down its intelligent readers:
- Here’s Why the Stock Market Just Had Its Best Week Since 1974 (Forbes)
- Everything is Awful – So Why is the Stock Market Booming (NYT)
- S&P 500 Posts Best Week Since 1974 (Business Insider)
The writers clearly do not understand the concept between signals and noise.
The CRAWL Method
Bruce learns from Mark how he packages loan requests through his CRAWL methodology that he’s honed over a 20-year time span.
C – This letter stands for clarity as Mark wants to know what the loan for, why it’s needed, and how it will be paid back. Sounds simple, right? Yet, many owners want cash without understanding how operational and debt management intersect. Mark also reminds us of the 5 Cs of lending.
R – This letter stands for reporting, and Mark reminds us that this action is more than just pushing a button from SAP, Navision, Epicor, or QuickBooks.
A – The bank will want to see action plans on initiatives that will be taken to pay back the loan. Mark explains this is his favorite part of loan packaging.
W – Once the first three letters are addressed, Mark writes the winning presentation which is about 13-16 slides in PowerPoint. He does not like presenting static historical or future-based reporting. Instead, he’ll go through his financial model making changes on the fly based on banker questions.
L – This letter stands for loan packaging. The bank requires numerous documents, so Mark assembles all documents in either 1) FilesAnywhere or 2) on online project management tool. His favorite method is to create a mindmap, attach documents, and make the mindmap accessible online – but that’s for more complex requests. As explained in the podcast, Mark never shares the winning presentation – he’ll provide after the bank presentation.
Revisiting the Winning Presentation
Bruce kept probing and mining for some additional nuggets from Mark’s winning presentation suggestion. Bruce and listeners will learn about three powerful emotions that Mark tries to alleviate or trigger –
Fear – every page and comment during the winning presentation should be about trying to eliminate fear in the banker’s mind. If Mark believes in the loan, then the banker should too. That means Mark is trying to remove fears and concerns about extending credit where risk is involved.
Excitement – Mark tells us that he wants the banker to get excited about this loan. There’s no manipulation, but the narrative needs to be powerful enough where the banker doesn’t want Mark’s client seeking lending elsewhere.
Confidence – Mark can tell within 5-8 minutes if the banker is confident with management’s ability to repay the debt. That’s why the CRAWL method is so critical because it’s about providing the answers to the banker before the questions are ever asked. More importantly, it’s about showing how those action plans will be operationalized flawlessly in order to repay the debt.
Stump the CFO
Every day is a slow news day for sports journalists during this pandemic that’s shuttered sports. That was especially true when Yahoo wrote about Ray Allen recommending that fellow NBA greats grow out their hair – no more bald look.
Mark took the bait and challenged Bruce to a game of Stump the CFO. He asked Bruce for the top business executives sporting the bald look.
A CFO Booklist
Bruce and Mark want to thank fellow CFO, Paul May for sharing meaningful books that he’s read and listened to over the years.
Want us to read your booklist on a show? Drop either of us a message on LinkedIn, and we’ll let you know when we share it.
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