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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.”

Lester is leading the charge in today’s African American giving-circle movement.

Did you know that black philanthropy has roots in the 19th century?  As Harriet Tubman led thousands of slaves to freedom in the Underground Railroad, her success was largely due to black charitable giving. Volunteers, mutual aid societies, Quakers and other groups joined together to donate money, shelter, food, and supplies along the way to ensure a successful operation that spanned a decade. This form of collective philanthropy still exists in the form of a growing trend, called giving circles. A giving circle is a philanthropic vehicle in which individual donors pool their money and other resources and decide together where to give them away.   Just as Tubman was a leader in spurring charitable giving then, philanthropist Darryl Lester is leading the charge in today’s African American giving circle movement.

“Giving circles are a resurgence of an old tradition of generosity and caring that is making an impact all across the country,” says Lester, president of HindSight Consulting, Inc., a research and development company that designs tools and services for institutions and communities. “They provide an opportunity for individuals to join others through collective charitable giving. There is something exciting about people pooling their resources and making joint decisions on how to give grants to improve life in their community.”

In 2003, Lester received a grant from the Ford Foundation and began work with young African American adults in the South to focus on how they engage and give back to their communities. For many of them, their intellectual and financial capital was undervalued. Along with the support of various sponsors, HindSight Consulting organized these individuals into giving circles to strategically invest their time, talent, and treasures back into their communities in an effort to address issues of race and equity.

Now, Lester has helped to form 11 African American giving circles that are members of the Community Investment Network, a resource he started to support and sustain giving circles. Interested in starting a giving circle?  Here are some tips to get you started:

Develop a strategy. In addition to naming your group, questions to discuss at your first meeting are:  What will be your giving circle’s mission? How many members will you have? How much will each person donate?   How often will you meet and where?

Choose a cause. Not only do giving circles provide funds, but they also provide support to their local nonprofit community. As your giving circle begins to grow and raise funds, you should decide what geographic and issue areas you will support, how you will select organizations to fund, and how often you will donate.

Decide where to place your collective donations. Will your group open a joint bank account or use a nonprofit to serve as a fiscal agent?  Other options include writing a check to an organization, setting up a donor advised fund at your local community foundation, or becoming a public foundation.

Other Black Giving Circles:

The Circle of Joy Atlanta

A Legacy of Tradition

Black Women for Black Girls Giving Circle

Tracey Webb is the founder and editor of BlackGivesBack.com, a blog that highlights African American philanthropy. She is also the founder of the Black Benefactors, a Washington, DC based giving circle that provides grants to organizations serving the African American community in the DC region.

“The selection process is critical to the Venture Philanthropy Partners funding model,” says Carol Thompson Cole, president and CEO of VPP, a Washington, D.C.,-based charitable investment organization that supports nonprofits that serve indigent children and their families. Cole describes her organization’s strategic approach to decision making as part investigative, part instinctive, and wholly unbiased. She says this method maximizes her organization’s philanthropic investment in the Washington, D.C., metropolitan area.
“It’s clear that how we decide on our investment partners is as important as who we actually choose,” she adds.

Compelled to continually refine the VPP  selection process, Cole takes ideas from Malcolm Gladwell’s best-seller, Blink: The Power of Thinking Without Thinking (Back Bay Books; $15.99), to augment her team’s approach and perfect their instinctual sense. Gladwell made several procedural distinctions:

Appreciate “automatic instantaneous thinking.”
Gladwell maintains that there can be as much value in the blink of an eye as in months of rational analysis. He encourages readers to respect the possibility of knowing something without knowing how or why they know it. Cole follows her gut instincts when everything else is in question.

Sharpen skills for making snap judgments.
Gladwell asserts that the power of knowing in the first two seconds is not a magic gift to a fortunate few, but an ability that can be cultivated by everyone. He challenges readers to abandon traditional decision making, which often requires excessive information and exhaustive analysis over an extended period of time, in favor of honing innate judiciousness. Cole coaches her team to identify and focus only on the most relevant information required to make timely, effective decisions. The group quickly assesses potential partners by looking for key success traits and proven performance indicators that align with VPP’s investment criteria.

Guard against compromising biases.
Gladwell points out that while unconscious thinking is powerful, it’s also fallible. He explains that our instinctive reactions often have to compete with other interests, emotions, and sentiments. And he warns against ignoring these subtle influences—personal experience, education, and societal prejudices—that can alter or undermine unconscious reasoning. Cole ensures that the VPP selection process has a system of checks and balances to prevent any inadvertent discrimination.

This article originally appeared in the April 2010 issue of Black Enterprise magazine.

Responsible for the safety and functions of the nation’s transportation systems on land, sea, and air, the DOT buys more than $4 billion annually in products and services. They purchase a variety of services including construction, rail safety, automobile and truck safety, research, highway engineering, information technology, finance and program administration. And through the Recovery Act, there is even more opportunity—up to $48 billion has been allocated to invest in America’s transportation infrastructure, thereby creating 400,000 jobs that focus on rebuilding roads, bridges, schools, and updating buses and trains.

The agencies under the DOT are all implementing their own programs and contracting opportunities through use of the Recovery Act funds. They include:

–The Federal Aviation Administration

–Federal Highway Administration

–Federal Railroad Administration

–Federal Transit Administration

–Maritime Administration

Three ways to heighten your chances at nailing a piece of the Recovery Act funds through the Department of Transportation:

Become a disadvantaged business (in name only). To set yourself up to do business, read The Contender (July 2009) for the basics such registering with the Central Contractor Registration database and working with Procurement and Technical Assistance Centers, which assist minority and women-owned business in marketing to the government. You can register for the disadvantaged business enterprise (DBE) program, which strives to increase participation by minority business enterprises in state and local procurements. There are three major DOT agencies involved with the DBE program: the Federal Highway Administration, the Federal Aviation Administration, and the Federal Transit Administration. You can seek certification as a DBE through your state’s Uniform Certification Program (UCP).

Utilize DOT resources. You can consult the DOT’s Office of Small and Disadvantaged Business Utilization (OSDBU) for assistance throughout the procurement process. Take with you a one-page capability statement for submission. The OSDBU offers a national information clearinghouse (NIC) where you can receive counseling on how to market the DOT for contracting opportunities and the appropriate points of contact at the federal, state and local levels. Speak with a DOT small business specialists who can help identity procurement opportunities under each DOT agency. For contact information to NIC and the appropriate small business specialists, see Contracting with DOT: A Guide for Small Businesses.

Construct your own Recovery Act. Track down the various procurement opportunities the DOT is offering. Check out the DOT procurement forecast at for information on anticipated procurements of more than $100,000. It is issued the first day of each fiscal year, which is Oct.1. You can search by quarter, industry category, operating administration and key words. The DOT offers a purchase card program, which lists micropurchases up to $3,000. You can go directly to the supplier or service providers for the micropurchase. Of course, there is also subcontracting where you can partner with other companies that have a procurement grant or are going after one worth $550,000 or more.

For more information on doing business with the Department of Transportation, check out the October 2009 issue of Black Enterprise.

Lezli Baskerville, president of the National Association for Equal Opportunity, which lobbies on behalf of the 103 public, private, two-year, and four-year historically black colleges and universities suggests that the federal government bail out HBCUs in the same way that they rescued AIG, IndyMac, and Goldman Sachs.

“At no time have HBCUs had endowments and access to public or private resources comparable to those of their white counterparts,” Baskerville says. “Our institutions have far fewer resources to begin with. Despite our very best efforts, our institutions are not getting a fair share of public resources of research dollars or public technical assistance dollars.”

Many agree with her, and believe that Troubled Assets Relief Program (TARP) funds used to keep financial services institutions from going under should also be used for HBCUs. There are at least eight colleges and universities that are in dire financial circumstances and in need of an immediate infusion of capital to remain viable, according to a letter that Baskerville wrote to Congress in the early stages of stimulus planning.

Traditionally white institutions are suffering as well. Drew Gilpin Faust, Harvard’s president, expects that the Harvard Endowment will lose 30% of its value by the end of fiscal year 2009. She also plans to trim 10% to 15% of its budget and increase tuition by 3.6% for the 2010 academic year. In comparison, Spelman College, which tops Black Enterprise’s Top 50 Colleges for African Americans list and has a $351 million endowment, will eliminate 12 vacant and 23 existing positions and restructure its education department.

“Nobody has the endowments that they had a year ago. Everybody’s endowments have been hit pretty hard,” says Michael Lomax, president of the United Negro College Fund, which collects charitable giving for 39 private HBCUs. “This is going to be a hard period to grow endowments.”

A large percentage of HBCUs don’t have endowments at all. Spelman is just one of only three HBCUs with an endowment of more than $200 million. “If you don’t have an endowment, then operating costs are more expensive,” says Sid Credle, dean of the business school at Hampton University, No. 4 on the Top 50 Colleges list. “There will be a decrease in scholarships, which will have an effect on enrollments at smaller HBCUs.”

Enrollment is down at Fisk University, ranked No. 8 on the Top 50 Colleges list, by 11% and donations are lagging last year’s rate by more than 40%. Fisk announced that the school would be reducing its expenditures by 15%.

Clark Atlanta University, No. 13 on the Top 50 Colleges list, cut 70 professors and 30 full-time staff in February and will receive $428,000 for facilities and equipment. This money came from $238 million in earmarks, which was attached to the stimulus package and allotted to 22 HBCUs, Hispanic-serving institutions, and tribal colleges, collectively known as minority-serving institutions.

Although grateful for these funds, advocates of HBCUs say that more is needed, considering that minority-serving institutions graduate a disproportionate amount of the country’s diverse workforce.

HBCUs are continually ranked among the top schools in the nation. Black Enterprise Magazine’s Top 50 Colleges for African Americans placed four HBCUs in the top five positions. Harvard was ranked No.10.

HBCUs represent only 3% of all colleges and universities, yet they enroll 16% of all African Americans in 4-year, degree-granting institutions. They graduate a large percentage of African Americans with degrees in engineering, sciences, technology, mathematics, and the health sciences, according to Baskerville.

“The nation has to recognize the browning and blackening of the country and recognize the critical role that HBCUs play in producing students,” Baskerville says. “If we are talking about remaining or becoming an eminent technological society, we’ve got to educate the growing populations of the nation; which are Latinos and African Americans.”

Next in the series: HBCU Students Seek More Avenues for Funding