Have you ever had a problem finding common ground or getting someone on board with your idea? In Max Siegel’s book Know What Makes Them Tick learn how to bridge those gaps. This book will help you connect with others in almost any situation. Do you need to smooth things over with your family, or need a business partner to get to your way of thinking, then this book is for you.

Max Siegel is the CEO of Max Siegel Inc. Max Siegel Inc. is a sports, marketing, entertainment, and media holding company. He has over 20 years of experience in the sports and entertainment industry. He also made history as the highest ranking African American executive in NASCAR. Over his twenty years in the business he has honed his skills at becoming a “people” person, which he is now sharing with the world.

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Mitchell, president and CEO of Washington, D.C.-based Industrial Bank (No. 8 on the BE Banks list with $382 million in assets), knew that while the bank hadn’t been involved in the subprime market, there was no way it could remain unscathed. A lot was at stake. Industrial is a third-generation family business that was founded in 1934 by Mitchell’s grandfather, in the midst of the Great Depression. The 49-year-old Mitchell wasn’t about to let it fail now.

But the economic climate at the time of the Great Recession meant nothing was safe. More than 35% of Industrial’s outstanding loans are tied to residential mortgages and home equity lines, 32% are linked to commercial real estate, 20% are with local churches, and 10% with small business loans. As the U.S. continued to hemorrhage jobs, tithing declined in churches, affecting their ability to make loan payments. “We’ve had quite a few problem loans—mostly in commercial real estate—that we’re still working through,” says Patricia Mitchell, executive vice president of sales/operations and sister to the CEO.

Despite these challenges, the bank managed to keep costs low in order to consistently remain profitable—even when the economy was the worst it’s been in a generation. And now, Industrial faces the challenge of increased regulation while eyeing the possible need to consolidate to grow assets and resources.

From Great Depression to Great Recession
In the 1930s, Jesse H. Mitchell was a vice president at Industrial Savings Bank, a black-owned bank that closed during the Great Depression. “So, my grandfather and a few of the people who had been associated with Industrial Savings got together and formed Industrial Bank because there wasn’t any other black-owned bank in D.C. at the time,” says Patricia, a graduate of Drexel University. In the middle of the Great Depression, Industrial Bank opened with $250,000 in assets and 470 shareholders on the corner of 11th Street NW and U, an area in the Shaw neighborhood known as Black Broadway since it was one of the few places where African Americans could go to enjoy nightlife. Over the years, the bank expanded and now has eight locations and 28 ATMs in the Washington, D.C., metro area.

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But that growth hasn’t been without its share of challenges, the most daunting of which came courtesy of a global financial crisis that left banks of all shapes and sizes scrambling to meet liquidity requirements and seeking government aid. “We didn’t think it would affect us as much as it did, but obviously that happened after September 2008, as panic went through Wall Street and the large banks,” says Mitchell. “We didn’t have any exposure to [mortgage-backed derivatives], but as the economy got worse it started to affect areas of our portfolio.”

As unemployment rose, the team began to identify potentially troubled loans as quickly as possible to ensure that the bank had the proper reserves. They began reappraising property—since values declined so sharply— and took write-downs on properties that were underwater. To ensure that borrowers could keep making payments, they contacted them and renegotiated terms.

“We’re still attempting to do modifications for some of our borrowers and shore up where we can,” Mitchell says, “but we’ve made provisions for loan losses.” Funds that would have gone toward the bottom line were reallocated, and reserves for bad loans were increased to $2.5 million in 2009, $2.1 million in 2010, and are likely to reach $2 million for 2011. “That’s a lot of money, but fortunately we did it before the examiners made us do it.”

But other measures needed to be taken as well. For example, vacant positions at the bank weren’t immediately filled. “We stopped officer bonuses, executive management bonuses.
We froze salaries for executive management,” says Mitchell, a graduate of Rutgers University. “We did everything we could to get through this. It didn’t feel good, but we have employees who understand that these are tough times.”

Financial results took a hit, but Industrial stayed in the black. Profits for 2008 totaled $1.8 million. For 2009, a year when many banks posted losses, Industrial netted $77,000. By 2010, profits grew to $303,000, and 2011 is forecast to come in at around $1 million.

Regulation Blues
While Industrial Bank deals with the aftereffects of the crisis, it must also contend with stricter regulation. Community banks have to comply with much of the regulation that’s aimed at curtailing the big banks that received bailout funds. But these smaller institutions, unlike the big banks, often struggle to secure the manpower and financial means they need to ensure compliance. As a result, Industrial is identifying new revenue lines.

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The traditional banking model is simple: Consumers deposit funds that a bank lends to businesses or other consumers while collecting fees for ATM use and other services. According to the Mitchells, Industrial is considering selling insurance and investment products, or offering such fee-based services as financial planning. Consolidation is also on the table. “We want to do an acquisition because the bank needs to be larger,” says Patricia. “There’s thousands of dollars in new compliance costs as a result of the new regulations, and the only way to absorb a lot of that is to grow. We are currently in a strategy to raise capital that will, in turn, lead to an acquisition.”

How to Obtain Bank Financing for Your Business

While small business loans slid 4.1% from 2009 to 2010, there was still some $310 million that banks extended. So while credit may be tight, capital is out there. But what do banks look for these days before extending a small business loan? “I think a lot of people have the impression that banking is rocket science,” says Douglas Dillon, senior vice president of commercial lending for Industrial Bank. “But even non-bankers can understand the basics.” He says banks look for the following criteria:

• Strong historical cash flows. A banker will first examine your income statement and bottom line, and then add back a few things that are fairly essential to the cash flow analysis, such as depreciation, a noncash expense. They’ll use the business’ interest expense to come up with a rudimentary cash flow number. “That’s important because bankers just want to have an idea of your capacity to repay their loan,” says Dillon.

•  A good debt-service coverage ratio. This is the ratio of cash available for debt servicing to interest, principal, and lease payments. The banker will calculate this by adding annual net income with amortization/depreciation, interest expense, and other items, and dividing that sum by the borrower’s loan principal, interest payments, and lease payments. “This is the key ratio that most bankers are going to look at,” Dillon says. He notes that most banks consider a debt-service coverage ratio of 1.20:1, or 1.25:1 to be very good.

•  Core financial strength versus just operational strength. Dillon cites loan applications from two restaurants, both of which look good operationally. “One has a little bit stronger following—both serve good food. But one negotiated a lease with a rent that’s below market and has low annual escalations. It’s also in an excellent location with major tenant improvement allowances from the landlord. Plus, it’s secured a contract, so some of its revenue is assured. The second did a good job establishing a financial foundation, but not as good as the first.” As a result, while both have operational strength, the first one also has a more established financial foundation.

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•  A solid credit score. There’s no getting around the fact that banks will look at the majority shareholder’s credit history. “It’s important to know your credit score. If it’s lower than 660 or 680, you need to start thinking about ways to improve it, if at all possible, before you walk into the bank,” says Dillon. “Now, if you don’t have a 660 credit score people may still take a look, but it makes it a bit harder. At some banks, your personal credit score for small business is one of the key determinants of whether the bank is willing to lend or not. That’s not necessarily the case with us, but a credit score is an indicator of ability and willingness to repay personal debt.”

•  Collateral. The C-word isn’t something many small business owners want to hear from a banker, but according to Dillon, collateral can come into play right behind cash flow in terms of importance. It is even more critical now as banks continue to try to mitigate risk. “We need to have a secondary source of repayment behind the operating cash flows of the business,” Dillon says. “That can be hard to find these days, so we sometimes use Small Business Administration guaranties to make loans where collateral strength is minimal. We’re utilizing the SBA’s CAPLines line of credit product and actively seeking out clients that need lines of credit. The SBA has made the product more attractive to lenders, and it helps mitigate some of the collateral concern so that we don’t necessarily need a 100% collateralized loan.” 

Pay it forward: CEO Link Howard with one of his interns

Two years ago, Link Howard, III, president and chief executive officer of Powerlink Facilities Management, knew he needed help with his business. While the Detroit-based provider of facilities maintenance and management services was generating nearly $11 million in revenues, Howard was unable to land more than a $150,000 line of credit from his bank.

Howard heard about the Urban Entrepreneur Partnership of the Ewing Marion Kauffman Foundation from a business contact. With offices in Kansas City, Detroit, Baton Rouge and New Orleans, the non-profit program centers on educating entrepreneurs so they’re able to build scalable businesses. “I went on line and filled out the initial application and as a result of that we went through the rigorous screening process that the Kauffman Foundation at the UEP require of all of its companies that they partner with,” recalls Howard. “Interestingly enough, that is one of the most valuable parts of the entire process and I’ll come back to that.”

A business coach looked over Powerlink’s strategic plan, marketing plan, and offered advice on how to strengthen the business. “Going through the process of providing all the documentation information they were looking for caused us to really look at all of our processes of how we captured data, how we report things, and made us look at it operationally,” Howard recounts. “Going through that process really helped us strengthen our internal processes and really helped us to continue to grow our infrastructure, which is what I think is so important for businesses that are going to be successful.”

“We have a process that includes heavy assessment up front, a rigorous assessment up front,” says Daryl Williams, CEO, Urban Entrepreneur Partnership Inc. “We give each and every client a Personal Development Plan, which is an actual document that dictates what it is you want to do, where you are now, and the challenges that you face in order to reach those entrepreneurial goals, and we provide you an individual coach that will really walk you through those and have accountability model throughout.”

This doesn’t come without a cost. UEP workshops run about $400 and business coaching is $125 per hour. The coaching also helped Howard and his team gain a better understanding of what banks look for before extending credit. “Up until two years ago, up until last year, we were not able to secure the type of credit line that we needed from traditional banking institutions so we were doing a lot of factoring,” he says. “[the coaching], along with some other factors, certainly helped us to present a picture that the banks wanted to see.”

Two years later, Powerlink now employs 585 people, and is expecting to grow to 675 in 2012. Revenues are expected to approach $22 million at the end of 2011 and reach $27 million for 2012.  And perhaps most importantly, the company was able to secure a $2.5 million credit line.

For Howard, the coaching is an ongoing thing. “We meet consistently with our business coaches. They are, right now, helping us to transition into businesses that are target industries that we’re not involved in now,” he says. “They are providing coaching and mentoring in that regard. They have seminars, so you can continue to learn.”

The driving force behind our cover story, “The Business of Broadway,” was my desire to spotlight an elite group of African American producers and directors who work backstage, paving the way for a greater diversity of faces, voices, and stories onstage. We also decided to focus on the new face of Broadway, Grammy Award-winning songstress Alicia Keys, who is a co-producer of Stick Fly. Keys is following in the footsteps of other black entertainers who have signed on as investors and producers of Broadway shows. In 2009, Shawn “Jay-Z” Carter, Will Smith, and Jada Pinkett Smith came in as backers of the musical Fela! And The Color Purple went on to gross more than $100 million during its run from 2005 to 2008.

But it was hip-hop mogul Sean “Diddy” Combs who first proved that black shows aligned with black stars could draw huge black audiences—and net profits to boot. Combs starred (and reportedly invested) in the 2004 revival of A Raisin in the Sun. Acting coach Susan Batson, who prepared him for the role of Walter Lee, was one of Raisin’s 13 producers and the only African American. Propelled by an audience that was 80% black, the play recouped its $2.4 million initial investment, grossing $7.9 million.

Black Broadway productions mounted by white producers are nothing new. Black plays going back to Raisin and musicals such as Sophisticated Ladies always had white producers and white audiences, says former Goldman Sachs investment banker Stephen Byrd, co-producer of the all-black cast revival of the 2008 hit Cat on a Hot Tin Roof and the upcoming A Streetcar Named Desire. “When it came to black plays, black audiences didn’t go outside of their comfort zone past the Beacon Theater.” But Byrd asserts that there is an underserved audience out there for shows that fall between Tyler Perry and August Wilson.

We hope this story will also serve as a call to action for more African American businesspeople, entertainers, and athletes to step up as Broadway producers and investors to get such shows made, utilizing resources such as the Theatrical Index (www.theatricalindex.com) to learn about plans for productions. It’s time for us to move down stage front and center.

Despite barriers to entry such as capital and tightly controlled theater space, a successful commercial mount on the Great White Way could be a long-term investment. “At the end of the day, it’s about real estate, if you can afford to live in that house, you get to rent it. As long as your play makes money you can continue to live there,” says director-producer extraordinaire George C. Wolfe.

Just as with the limited real estate on Broadway, there’s more great content than we could fit on these pages. Visit BlackEnterprise.com to view galleries on black-oriented Broadway shows. And watch the one-on-one interview with Keys on Our World with Black Enterprise.

(All images: Thinkstock)

Bank loans continue to be one of the more common ways to finance small business activity. And while some of the uncertainty of the financial crisis continues to linger and with a questionable economy and increased regulation, most banks remain highly conservative with regards to their lending activity.  However, banks need to lend because that’s how they make money, so it’s not impossible for small business owners to obtain bank financing.

Think banks aren’t lending? The American Bankers Association (ABA) reported in August that banks initiated roughly $1.6 trillion in new lending over the prior 12 months BlackEnterprise.com spoke with Dontá Wilson, BB&T North Alabama Community Banking President and Bob Seiwert, senior vice president of the ABA. Wilson held several key management functions in retail and commercial banking, having spent most of his banking career leading mergers and acquisitions. Seiwert is in charge of the ABA’s Center for Commercial Lending and Business Banking.

Here’s what advice they have to offer:

Find the right bank and the right banker.

Ideally, you want a relationship with a banker at an institution that focuses in on small and midsized businesses – and ideally, understands your industry. “Most banks will tell you that they do it, but not all specialize in it,” says Seiwert. “You want to find a banker that not only does this stuff, but also has products and services – other than loans – to compliment and meet your businesses financial needs.” He recommends connecting with industry trade groups to find out which banks are doing business within that industry. In addition, the Small Business compiles a list of the top small business lenders by state.

Develop and maintain a relationship with your banker before you need to borrow.

Long before you apply for a loan, you should have been in a relationship and building a relationship with a banker, says Wilson. “That way you have that trust established, so that that banker can really understand your business, spend intimate time, and then so they can help you prepare for that loan application or evaluation that they’re going to take you through,” he says. “In this type of environment we’re in now where relationship is so important, because banks lend to people and businesses. You want to have a relationship with an individual who can look outside of just the numbers since sometimes the numbers don’t tell the full story.”

Ask the right questions.

Find out from your banker what the bank looks for to qualify a loan.  “You got things like certain debt service coverage, like a general number, and having a debt service number of 1.25. Well, how do you calculate that debt services coverage and what does that mean from my income perspective?”

Other things to determine: what’s your debt worth number?  What does that look like?  What type of collateral are you going to need from that bank?  “Do that research before you walk in, so that when you walk in, you’re coming in with those things already answered. By understanding it, it helps you prepare a little bit and allows you to go in when the time is right,” says Wilson.

Be able to articulate your firm’s value proposition to its target market.

Why should customers buy from you? What’s your competitive advantage versus other companies? Do you have a business plan that really makes sense to reach these target markets?  “You’re not going to get anywhere with any knowledgeable banker if you can’t articulate this,” says Seiwert. “The banker is going to say, ‘If he can’t sell me, how’s he going to sell anything to anybody else?’”  He also suggests developing three plans: one with optimistic revenue and profit projections, one that shows a more likely situation and finally, a worst case scenario. In each case, state how the business will react to the situation. As banks are in the risk business, it will demonstrate you have a plan for mitigating these risks.

Be transparent with your banker.

“You never want to surprise a banker because you may not like his or her reaction. The whole business of banking is built on trust,” says Seiwert. If you’re only going to tell me the good stuff and you’re going to forget all of the bad stuff. If you’re only sending me information when it’s positive, that whole trust factor goes away.  He advises finding a banker that you’re comfortable with and develop a relationship where you can share the good, the bad and the ugly with the banker. He also suggests coming up with a primary and secondary way to repay that loan. This will help the banker become more comfortable with the risk level of extending a loan to your business.

Put some skin in the game.

“If you’re starting up a business and want 100% financing, forget it. How much skin in the game varies by industry, which varies by the assets that you need. So how do you figure that out?  Talk to a banker that lends to firms in your industry.” asserts Seiwert. “Don’t ask for a loan that should be funded with an equity injection by the owners.  Bankers are not paid to take equity risk.  We need to get it repaid because what we’re doing is lending shareholder and depositor money and they all would like it back with some interest.”

On an average day, more than 240,000 passengers board or disembark from an average of nearly 2,700 arriving or departing planes. Every bit a megamall as much as it is an airport, Hartsfield-Jackson—with its more than 260 retail stores, convenience outlets, and eating and drinking establishments—contributes more than $32.5 billion to the metro Atlanta economy. The South may have a reputation for being more relaxed and slower-paced, but this airport clearly marches to a quicker beat.

In this setting, it’s no surprise that the highest grossing T.G.I. Friday’s in the U.S. has operated here at Concourse B since 1996. Servers efficiently take orders, serve meals, bring out the check, and usher guests in and out—turning tables. Most diners are concerned about time since they want to catch their flights. Faster turnover equals more business. With revenues projected to reach $8.2 million this year, the 3,300-square-foot casual dining location is small but well-managed. A second store, opened in Concourse E in 2006, is expected to add an additional $5.3 million in sales for 2011.

Though strong performers, even these bustling locations were affected by the economy as business travel dipped. For their owner and operator, Jackmont Hospitality Inc. (No. 71 on the BE Industrial/Service Companies list with $50 million in revenues), it meant three consecutive quarters of slightly lower revenues. “Business at the airports fell off 6% to 8%, and 4% to 5% on the street [not at an airport], so it was nothing significant,” says Daniel J. Halpern, Jackmont’s CEO. Since opening its first location in 1996, Jackmont has expanded and now boasts 10 T.G.I. Friday’s locations and has another two in the works. Now that the worst of the recession is hopefully over and done with, Halpern has his sights set on further expansion.

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LOCATION, LOCATION, LOCATION
Jackmont Hospitality’s business model is simple. It’s based on building stores in urban areas where there are few services and, ideally, unmet demand. The company looks for a dense population in high-traffic areas as well as other metrics, such as homeownership rates and the length of time residents have lived in the community. But the team also kicks the tires, so to speak. “You kind of start off doing more intellectual research,” says Halpern. “But it always ends up with just getting in the car and driving around—at lunchtime, or Saturday night at midnight. Just to see what’s going on in the area.”

That approach has helped the company maintain sales in spite of lean times. “We have been fortunate in that we are almost always beating our comp sales,” says Brenda Branch, vice president of operations, describing the restaurant chain’s year-to-year sales performance. The company has the rights to open T.G.I. Friday’s locations in the metropolitan areas of Washington, D.C.; Maryland; and Philadelphia, in addition to Georgia.

Halpern points to the company’s newest location in District Heights, Maryland, that opened in March as a perfect fit for the company’s model. Located at a major intersection—Pennsylvania Avenue and Silver Hill Road, just a couple of miles from the Suitland Federal Center complex of several government agencies (and their 11,000 or so employees)—it’s easy to get to. “And there’s not another casual dining restaurant within a 3-mile radius,” Halpern says. He also notes that it’s outperforming most of the company’s other locations when they were at this stage.

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A LITTLE HELP FROM A LEGEND
The company’s beginnings were as humble as those of many others—but Jackmont’s include a helping hand from a legendary mayor. While studying at Cornell University’s School of Hotel Administration, Halpern met Brooke Jackson Edmond, daughter of the former Atlanta Mayor Maynard Jackson. Upon graduation, Halpern went to work at The Gourmet Cos. (No. 20 on the BE Industrial/Service Companies list with $199 million in revenues). Later he decided that he and Jackson Edmond should go into business together. “I was another 31-year-old that wanted to be an entrepreneur. I wasn’t quite sure what I was going to do, but I knew it was going to be in the food service space,” he recalls. “Maynard was about to leave office and we figured we could get him involved to help us a little bit.”

With the mayor on board, the three launched Jackmont (the company’s distinctive name hails from the nickname given to the family resort of Jackson’s parents). Halpern says of those early years, “We started out with a desk and a phone at the Maynard Jackson Youth Foundation, and then began figuring out what we were going to do.”

During the ’90s, the business model for airports shifted. Initially places with a few convenience stands, airports were transformed into shopping mall-like places complete with chain restaurants, retail outlets, and other services. So when the Jackmont team learned that food and beverage contracts were coming up for rebid at the airport, they wanted in. Concessions International, owned by H.J. Russell & Co. (No. 15 on the BE Industrial/Service Companies list with $268.71 million in revenues), bid on the entire block of concessions with Jackmont in as a subtenant on what would be the first T.G.I. Friday’s location there. But that required money, and that’s where Jackson stepped in. “We couldn’t make the initial capitalization happen, without somebody who had something to borrow against,” recalls Jackson Edmond, the company’s senior vice president and founding principal. “We went and spoke to him on that premise, and he thought it sounded like a good idea.”

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TRAGEDY STRIKES
By 2003, Jackmont was a solid, profitable business, and Halpern was thinking about expanding. “We were still trying to figure out if we were going to stay in the airport space or migrate out to doing restaurants on the street,” he recalls. “I don’t think any of us wanted to have all our eggs in one basket, which meant being involved in the public sector, and we wanted to have a little bit more autonomy.”

Before they could make any moves, though, tragedy struck. Jackson, the man who had helped the company access financing and who could pick up the phone and reach out to virtually any decision-maker, died in June 2003. The loss of one of the leading champions of black business sent shockwaves throughout the business community—in Atlanta and across the country.
Shortly after Jackson’s death, in a strange twist of timing, Carlson Restaurants, the parent company of T.G.I. Friday’s, offered to sell Jackmont four additional locations. But it wasn’t without risk. The purchase price came to nearly $11.5 million—a lot of money for a company in Jackmont’s position.

The offer came at a sensitive time. “That was a big test for us,” says Halpern. “I’d be lying to you if, after Maynard died, I said people didn’t think we’d be out of business. This man gave us an opportunity, got us in business, and got us to this point.”
For his daughter, Jackson’s death was, of course, a deep and personal loss, but she was confident that the business would continue. “He was hands-on when it came to strategic planning, or assisting us with important connections, or helping us to pull together some initial financing,” says Jackson Edmond. “But he wasn’t part of the day-to-day operations.”

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In light of the company’s strong financials, ideal locations, and track record that showed that the Jackmont team knew how to run the business, the financing came through and the deal was completed in December 2003. “We weren’t going to squander his efforts and let the naysayers be correct,” says Halpern. Since then, the majority of Jackmont’s focus has been on building Friday’s on the street, though a location at Miami International Airport is scheduled to open this month.

BACK TO SCHOOL?
In addition to its franchise business, Jackmont has existing contracts to provide food services to Morehouse College and Spelman College through joint ventures with Sodexo and Aramark, the food and facilities management giants. Though only about 1% of the company’s total revenues, food services is an area management is considering expanding. “The Friday’s business has been our bread and butter for a number of years, but we look at the education market as an opportunity,” says Branch.

For the time being, however, the company will continue to focus on its restaurant locations in urban areas. “They have a solid leadership group with a proven track record that knows how to drive restaurant businesses,” says Nick Shepherd, president and CEO of Carlson Restaurants. “They’ve mastered running urban locations where there’s high volume and a good mix of bar business as well as restaurant, in very competitive markets where they focus on driving high-quality service because they know how to attract and retain great talent.”