Certain business relationships are prime examples of being between a rock and a hard place. Operating in the nexus between business valuation and bank loans offers a perfect example. When the business valuation experts at my organization Sofer Advisors and I are working with clients and banks, concern emanates from each side. Banks worry about security and compliance. Business owners fret over valuations influenced by financial services juggernauts.
Yet when we at Sofer apply our expertise with our trademark diligence and fairness, especially with clients who collaborate with us to build a roadmap to valuation success, both sides win. Banks secure new customers, and small and medium sized businesses gain access to the capital so crucial for their success.
How to increase the value of my business to get a bank loan?
Now for a client story evidencing this reality. Many of our engagements start with an entrepreneur who says: “I need a business valuation for my bank.” (Quite often, they wish to secure an SBA loan, a bank loan secured by the Small Business Administration, formed by President Dwight D. Eisenhower to support and protect the American dream of business ownership.)
Naturally, business valuation and SBA loans go hand in hand—the former is often a critical component of proving to a bank that a business, often early in its life cycle, is indeed credit-worthy. And while some business owners will focus on this single transaction, Sofer Advisors takes a broader view on the relationship between banks and their business customers, one that can pay dividends for both sides.
In fact, our firm’s relationship with a popular regional bank serves as an excellent example for how this can work out in everyone’s favor. Just over two years ago, Sofer Advisors caught the eye of a wealth manager at a regional bank we won’t name due to the non-disclosure clause in the massive contract we recently signed with them (more on this later). We helped the wealth manager’s client build a roadmap to double his company’s valuation over the next decade. When another client expressed the need for similar help, the wealth manager also brought her to us, and we successfully helped our mutual client as well.
Suddenly, we had an internal advocate helping us navigate the bank’s vast and confusing organizational structure. This matters more than one might think. Why? Because partnering with a bank can be like the film Inception, where 5 realities are all intermingled. Our advocate helped us penetrate this labyrinth, first by introducing us to the wealth management team serving as the brain trust for wealthier clients. Referrals from the wealth management side soon exploded as more areas of the bank saw what we were capable of providing.
Eventually, we made the right contacts on the lending side. (These handle SBA loans and other loans to business owners.) We thought finding the right people was the hard part—but we were sorely mistaken. We were just beginning a two-year journey to prove ourselves capable. And to say the bank put Sofer Advisors through a rigorous evaluation process would be an understatement.
We had to document the credentials of our leadership team and demonstrate an exhaustive background check procedure for everyone we hired. We were then probed over our insurance coverage, disaster recovery plans, even our cybersecurity procedures. Thankfully, we passed these tests with flying colors, culminating in the signing of a 60-page contract between Sofer and the regional bank stating we could provide independent business valuation services to its customers nationwide.
How an SBA loan valuation can help you with your bank
The bank also won big in this arrangement. Traditionally, business valuation is a box-checking exercise from a bank’s perspective, a necessary part of completing a loan. But Sofer has been able to go far beyond this being a mere routine step. We’ve brought new (and better) prospects to the bank. That’s because we help businesses improve their valuations, removing stumbling blocks holding them back from being “bankable” in the eyes of financial institutions. And receiving new, viable customers is a positive for any bank!
At the same time, Sofer Advisors helps its clients create a roadmap for success once an initial valuation is done. When a business owner determines a bank loan is a good idea to fuel future profitable growth, we partner with them to de-risk their operations and shore up their balance sheets. We also coordinate on other activities aimed at making their loan application as robust as possible. The net result for aspiring entrepreneurs? A positive sum banking relationship in which their financial institution promotes their mutual success.
If you are considering an SBA loan or are having trouble building a positive relationship with your own bank, contact Sofer Advisors for an accurate valuation of your business, especially to produce a higher valuation in the future. Schedule a call to Sofer Advisors for your very own complimentary consultation.
David Hern is the founder and chief executive officer of Sofer Advisors, LLC focusing on business advisory services related to litigation assistance, estate and tax planning, and business enterprise valuations for various privately-held and public companies. He is a qualified financial analyst with a proven ability to simply and clearly communicate analysis to boards of directors, presidents and CEOs, CFOs, controllers and private equity portfolio managers. David has been recognized for enabling organizations to determine their enterprise and equity value for a variety of situations including strategic planning, sale or IPO, mergers and acquisitions, financial reporting (common stock, stock options grants, purchase price allocations, impairment analyses, etc.) and tax compliance (estate & gift, 409A, NUBIG). Industry experience includes, but is not limited to, professional services, business service, healthcare, information technology, financial services, and manufacturing & distribution.
