Guest post by Richard Gray, Senior Vice President, Commercial Lending, Bank of American Fork

Since coming out of The Great Recession, business owners and individuals are increasingly aware of the way debt can be harmful. However, debt can also be good for businesses and now is a good time for stable companies to consider debt for expansion or revenue growth—values are stabilizing, but are still low compared to historical values. If your business is renting or leasing space, consider putting away some equity for yourself.

Though this recession has been toughest on small businesses, some of the greatest opportunities currently lie in the commercial real-estate market. Buyers can now access prime real estate for much less than a year or two ago, particularly in the commercial market where vacancy rates are up. Cash-starved owners and foreclosure sales have resulted in an unusually high volume of commercial properties priced very low. While there’s still abundant supply, small business owners should seriously consider whether now is the right time to purchase commercial space. 

Business owners should consider the different types of financing available, depending on current resources, current needs and strategic plans.

One of the best financing options for Utah’s small businesses seeking to purchase or construct owner-occupied real estate is Small Business Administration, or SBA loans, which are specifically designed to help companies grow and prosper. They are ideal financing vehicles for office buildings, warehouses, retail outlets and special purpose-type facilities, such as restaurants, lube shops or car washes. And thanks to the federal government’s efforts to stimulate the economy, these types of loans are more plentiful than ever. 

Because SBA loans are partially guaranteed by the government, most banks are willing to make them, even to businesses that may not qualify for a conventional loan. SBA loans are also less capital-intensive, requiring just 10 percent to 20 percent down, versus the 30 percent to 35 percent down needed for conventional loans. 

If you’re worried your business may be too big to qualify for an SBA loan, know that a small business is defined as having less than 500 employees and less than $7.5 million in annual revenues (depending on the industry). This means 95 percent of Utah companies are eligible.

Another answer to financing for some small-business owners is to obtain a personal loan to purchase a building and then rent the building back to the business. One of our customers recently did this: the company had outgrown the office/manufacturing/warehouse building it had been renting. The owners found a new facility and, because they were seeking to use the building for the long term, considered whether or not they should purchase the building. Their main concern was the consequence of taking capital out of their business to make the purchase.

After analyzing the owners’ own finances, I recommended they consider purchasing the building under their personal names and then have their business rent it from them. This model allows the company to utilize its capital to grow the business, while giving the owners an opportunity to increase and diversify their personal wealth with commercial real estate. 

Business owners can also consider conventional loans. Conventional financing requires a larger down payment than an SBA loan. Property values and interest rates are historically low, and regardless of how business-owners finance their buildings, now is a good time to consider buying.

When the opportunity is right, small businesses and owners can greatly benefit by owning their own commercial property. The money they pay in principal toward a real-estate loan each month goes towards building equity instead of lining someone else’s pocket. They have more control over their environment and can put money into a long-term asset that meets their specific needs instead of improving someone else’s building. Ownership also insulates companies from higher rent payments, which are likely to surge as the economy recovers.

Business owners can offset costs and leverage current commercial real-estate rates to plan for their future by purchasing a building they can grow into. As long as the business occupies at least 51 percent of the building, it can qualify for an SBA loan. Under this scenario, a company can buy the property now at lower-than-normal costs, lease out the other 49 percent until it needs the space, and use the rent it receives to cover part of the building loan payment.

Business owners who are just beginning to think about buying their building can prepare now. Owners can use the rule of thumb that if the price of the building times one percent, which would be a rough idea of principal, interest and taxes, is equal to or less than their current payment, it may make sense to consider buying.

While the economy has produced challenges for everyone, it has also created one of the greatest buyers’ markets for commercial real-estate in recent history. There are many attractive options for small businesses. If you are qualified to purchase commercial real estate, this might be the ideal time to invest in yourself and your business.

Richard Gray is senior vice president of commercial lending and SBA lending at Bank of American Fork, Utah’s community bank leader, an Equal Housing Lender and Member FDIC. Richard also manages the bank’s Murray branch, and he has assisted local small businesses in obtaining SBA funding for more than 25 years. He serves on the board of directors for nonprofit Kostopolus Dream Foundation and was the chairman for nonprofit Utah Microenterprise Loan Fund, Salt Lake City.

 This article first appeared in The Enterprise.

Bank of American Fork is getting a system upgrade, so from April 1-8, 2013, customers will be unable to change their check card PIN.

If you have questions or need more information, please call 800-815-BANK.

“Okay, so you’re saying you need money,” said Ken Burnett, director of training at Bank of American Fork, during a Teach Children to Save Day presentation. “How do you get money?”

“Sell small snakes!” answered one of the third graders.

“Help my grandma with groceries!” offered another student.

As the presentation went on, the students learned how they can make the most of what they earn—how to invest in their businesses, the value of money and how to save what they earn, even if their income is based on the current price of small snakes.

Again, this year Bank of American Fork is supporting the American Bankers Association’s National Teach Children to Save Day by supporting schools’ efforts to teach their children financial literacy throughout the month of April and during the year.

With the help of interactive activities, games, pictures and stories, children learn how to save their money and the importance of getting a head start on learning the benefits of building a sound financial future.

Research shows that today’s generations are less likely to save their money than any other generation. Teach Children to Save Day is designed to reverse the trend of spending and replaces it with the desire to save.

Our volunteers will provide your students with:

• Saving strategies designed for all age groups.

• Interactive games that show the value of saving.

• Tips for beginning to budget their money.

“I recently had the pleasure to observe a ‘Teach the Children to Save’ presentation given by Bank of American Fork. It was delightful to observe the interaction between the Bank’s trainers. The principles of saving were presented in fun ways, which the students are sure to remember.” Community Development Director for Financial Services Organization

“Thanks Bank of American Fork, we learned a lot about saving.” American Fork’s Greenwood Elementary 3^rd Grade Students

Call today at 801-642-3079 and schedule a time for our Teach Children to Save Day experts to teach your children responsible money management. Parents, talk to your kids’ teachers about how they’re participating.

Bank of American Fork and World Trade Center Utah are hosting an export financing seminar on Wednesday, April 3, 2013 from 8:00-10:00 a.m. The event will be at World Trade Center Utah, 60 East South Temple, Suite 300, Salt Lake City, Utah. Breakfast will be served.

Many businesses think they’re too small to participate in global markets, but the SBA can help you get started and succeed. If you own or want to start a small export business, there may be financing available to help you grow your business. Bank of American Fork is a Preferred Lender, which means faster turnaround times and local decision-making authority. We have money to lend and experienced SBA loan staff and lenders. At this seminar, you’ll learn more about how to get financing and be a part of the global markets.

Alan Beard, managing director for Interlink Capital Strategies, will present about EXIM Bank’s program for exporters. Steve Price, assistant district director for Utah District Small Business Administration, will present about the SBA’s export finance program.

Please RSVP to melanie.vanderhoeven@bankaf.com or 801-642-3042 as soon as possible. Validation available for City Creek parking lots.

Bank of American Fork’s Murray branch is being relocated to 5824 South State Street, to open for business in that office on July 1, 2013. The branch is currently at 195 East 6100 South in Murray where it has been in the community since 2003. This move will allow Bank of American Fork greater visibility and give customers easier access to the bank, allowing Bank of American Fork to better serve the community in the Murray area.

The current location will be open for business during its regular hours through June 28, 2013. The office will be closed June 29 for the move. The new location will open on July 1, 2013.

“We are excited to improve our location to better serve the community in the Murray area,” said Richard Gray, SVP of commercial lending and Murray branch manager. “This new location will give us better visibility and stature in Salt Lake County and improved access from State Street. We also look forward to this change to redesign the office space to better serve customers.”

The new location, previously a Wendy’s, is only six-tenths of a mile away from the current location. The bank is remodeling the entire building, designed to provide customers with the distinguished financial service expected from Bank of American Fork. The image shown is a rendering of the new office space.

Please call 800-815-BANK or visit a branch with questions.

The current location, at 195 East 6100 South Murray, UT 84107, has been purchased by University of Utah.

This series is written from experience and is part of Bank of American Fork’s management training program. The program embraces the philosophy that management is a skill-based job, and managers need to learn specific skills to be successful

Strategic planning is a management activity that elicits fear and loathing from managers at almost every level.  Strategy is often viewed as something “I have to do for corporate.” It may be so detail oriented that the content is hundreds of pages—the sheer weight of the strategic plan makes your building sink six inches, and is written in a secret language that you need the Rosetta stone to understand.  Many organizations don’t try because the difficulty seems too much for its value.

However, strategic planning is a core skill that your organization must demonstrate to be viable long-term.  Strategic planning requires use of a perspective or way of thinking that is analytical and creative at the same time.  Strategic thinking nests every decision and action in both a short-term and a long-term context.

Strategic plans should include the following components, with details in each area to support the organization’s long- and short-term goals. 

• Core Function – What is the focus of your organization? The core function question should also be asked within each department.

• Risk Management – Systems and processes that protect the organization from various types of risk.

• Money – Strategy for growing profit or managing/reducing costs, while maximizing and enhancing revenue streams.

• Internal and External Customers – Strategy for creating value for the customer in what we offer in terms of products and services.

• People – Are the employees engaged in their work? Do they have the capacity, or ability, skills and time, to do the tasks necessary to support the strategy of the organization going forward?

• Infrastructure – Strategies that address the efficient use of internal business processes, items necessary to keep the organization delivering on its needs, technology, training, human resources, and other support functions.

• Learning and Growth – Strategies and tactics that support change, innovation, expanded capacity and growth.

As you start on the analysis section of strategic planning, your job is not to reinvent the organization so you can do your strategic plan. You should listen to what your existing processes tell you, use your analysis of outside information and then go from there.

When you begin to analyze your organization, consider the following:

• Review your internal systems and processes.

• Identify what external factors will affect those internal processes. How does the external environment view those internal processes?

• As you analyze your environment, recognize critical areas that you may need assistance in to address or put placeholders in as you move forward. That said, you should not ignore an area because you do not have the answer.

• What are some areas where you don’t have the information needed to make a decision?

Types of analysis         

Environment Scan – How is the department/branch doing now?

An environment scan has nothing to do with potential indigenous ruins. Before you can make a plan of where to take your organization, you need to have a good understanding of where you are as an organization. An environment scan is an internal analysis.

SWOT – Strengths, Weaknesses, Opportunities, Threats

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. These come from within the company’s unique value chain. SWOT analysis groups key pieces of information into two main categories:

• Internal factors – The strengths and weaknesses internal to the organization.

• External factors – The opportunities and threats presented by the external environment to the organization.

PEST – Political, Economic, Social, and Technological

The PEST analysis tool is another way to look at the outside environment to make sure your strategic plan will address those issues. Along with the SWOT analysis, you will use these tools as resources in building your strategic plan.

Building the Plan           

After you identify an issue, then you need to develop a plan for how to get there. For example, if I determine what the department will look like three years from now, I must begin to develop now so that I will be ready in three years.  

Using the project plan approach, develop steps to begin to determine what the department will look like three years from now.            

Selecting the Items for Your Strategic Plan        

You should use your project team to identify a manageable number of items to develop into your strategic plan.  Consider these questions when you choose which items to focus on:

1. What do we have to do to keep the doors open? Are there regulatory or other barriers?

2. What do we need to do to make sure we are open tomorrow? Is the infrastructure in place to support future developments? 

Strategic planning skills will benefit your organization.  They make best use of the organization’s resources by focusing on key priorities that matter most.  Strategic planning helps to integrate the organization’s mission and values with objectives and specific goals that are consistent in a time frame that is within the organization’s capacity for implementation.  It will help you incorporate effective internal communication.

Some skills Ken has talked about are employee development, communication, coaching employees and managing change. What other manager skills do you want to know more about? Tell us in the comments!

Ken Burnett is vice president/director of training and business development for Bank of American Fork. He is responsible for training more than 300 employees on a variety of topics, including coaching and feedback for dozens of senior managers within the organization.

CEObuilder and Bank of American Fork invite you to join us on Wednesday, March 20, 2013 to hear a presentation by Brett Dagley, CPA and Partner with Eide Baily. Dagley’s presentation will be about understanding health care reform and its impact on your business.

As of January 1, 2014, the Patient Protection and Affordable Care Act will require all individuals in the United States to have some form of health insurance. Integral to this reform is the creation of state, regional and federal health care exchanges; individuals can purchase a variety of affordable health insurance plans and, if they fall within certain income levels, receive government-subsidized premiums.

This Act affects all businesses. However, large employers with 50 or more full-time equivalent employees will be required to:

• Provide affordable health insurance coverage for all full-time equivalent employees,

• Elect not to provide health insurance coverage, pay defined penalties, and send employees to a state, regional or federal exchange to purchase insurance, or

• Develop a new hybrid plan.

At this event, Dagley and the group will:

• Examine the basics of Health Care Reform and its impact on employers.

• Identify key decision points and action steps for affected businesses.

• Understand options available, including health insurance plans, exchanges and hybrid plan options.

• Discover how Eide Bailly’s Employer Health Reform Analytics tool enables companies to confidently make the best decision.

This forum will be held at Bank of American Fork, Riverton Branch Conference Room, 2691 West 12600 South, from 8:30 a.m. to 4:30 p.m. on Wednesday, March 20. Please RSVP here or by contacting Heidi at Heidi.carmack@bankaf.com or 801-642-3139.

The content of this presentation should not be considered legal, accounting or tax advice from Bank of American Fork.

Guest post by Richard H. Tyson, President, CEObuilder

In my recent blog post, I discussed the importance of strong personal motivation as one of two fundamental elements in achieving New Year’s resolutions (and other important goals).  The second critical element is personal capability.  Strong motivation provides what to do; capability is how to do it. Capability further breaks down into four components: (1) identifying the essential actions that will lead to the achievement of goals, (2) having or developing the ability to perform those essential actions, (3) creating appropriate visual scorecards to track progress and (4) enlisting the support of one or more interested persons to provide agreed upon sustaining actions. 

To achieve the first of these typically requires study and planning.  If your goal is to lose weight, for instance, you probably want to study the various weight loss alternatives available to you.  These might include ways to eat less or exercise more, special diets or even surgery.  A choice will be made to pursue one or more of these options—and an action plan will be developed to implement that choice.  Similarly, if a business wants to make more money, executives will examine the options for creating more revenue, increasing gross margins and/or reducing operating expenses.  They will then choose their strategies and develop an action plan.

The second aspect of capability involves the personal or business competency to enact the plan successfully.   The fact is this: if the competency required to achieve a goal is not one you possess—or can develop—you will fail.  This is where you must frankly count the costs of your goals and resolutions.  Do you possess the skills, aptitudes and resources that will be required to be successful?  Skills and aptitudes are the abilities to perform the essential actions that will lead to success. Resources often include other people, time commitments, equipment and/or money.  Both businesses and individuals need to carefully assess their capabilities to achieve their goals.

Once this assessment is complete, we often tend to immediately dive into action. However, this is generally premature unless we have taken the time to invest in two important insurance policies.  The first of these is to create appropriate scorecards.  The old maxim is absolutely true:  that which is measured gets done!  Scorecards should measure not only desired outcomes (such as “pounds lost” or “increase in profit dollars”), but also the essential actions that lead to those outcomes (“calories consumed” or “expense dollars saved”).

The second insurance policy is to engage one or more strong mentors, coaches—or as I like to call them, foot-burners, who will hold your feet to the fire.  These people are responsible for sustaining actions; i.e., providing support and follow-up to assure that you stay on track in fulfilling the essential actions that will lead to your success.  In a business context, these are often supervisors or bosses. This role has often been misunderstood or even entirely neglected in many organizations.  When this is the case, company goals always suffer.  Managers must recognize that their success relies heavily on how well they sustain the essential actions of their people. This is equally true of individuals and their resolutions.  Where they are strongly sustained by friends and family, success is virtually assured.  Where this is not the case, failure is rarely avoided.

If you sincerely desire to achieve success in your personal resolutions and/or business goals, recognize that strong motivation and willpower are not enough.  You must have personal capability to initiate and sustain the essential actions that will lead to success.  This includes clarity regarding essential actions, having the ability to perform those actions, measuring progress with appropriate visual scorecards and engaging supportive foot-burners who will sustain your progress.

Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses. For 21 years, CEObuilder has successfully brought about an outstanding financial return for CEO and executive clients through providing leading-edge content in the areas of strategizing, team-building, problem-solving and managing for results, as well as the use of proprietary learning and coaching.

 We have a special offer for home builders and their customers.

Building a home means spending a lot of time paying attention to the details, from blueprints to paint and everything in between. Luckily, choosing the loans that will finance your new home isn’t as complicated.

Simplify your financing with a construction loan and mortgage loan from Bank of American Fork. In addition to saving money, we’ll save you the headaches that can come with financing your dream home.

Bank of American Fork can help turn your dream into reality with a 3.99% construction loan (14.017% or 11.825% estimated APR*, depending on term) for loan amounts up to $417,000. Loans must be for new construction only (no remodels) on a primary or secondary residence (no rental properties).

Here’s what you’ll get with our low-rate, high-service, home-construction loans:

• Low, fixed rate for the 4-month or 6-month term† of the loan, a substantial savings off typical construction rates

• 1.5% or 1.75% origination fee (1.5% for 4-month term or 1.75% for 6-month term)

• An interest reserve will be set up to make the monthly interest payments during the term; the monthly interest payment will increase as the balance increases

• A balloon payment will be due at the end of the 4- or 6-month term

• Fast approval

• Multiple free draws

• Exceptional service 

Save thousands more with no long-term mortgage origination fee when you get both your construction and mortgage loans from Bank of American Fork.‡

A low, fixed rate for either four or six months and no mortgage origination fee, combined with low building costs, can potentially save you thousands on your dream home. 

FAQ

How much will I save, what is the normal origination fee?

On separate loans you would normally pay 1% origination on the construction loan and another 1% on the long-term mortgage.

How are you faster than the competitors?

Our loan decisions are made locally by our loan committee who meet twice a week. Additionally, local management of your construction loans allows for quicker receipt of checks on draws and now charge for additional draws so you save time and avoid construction delays.

Will I have to still have to fill out two loan applications?

No.

Learn more about this offer here or by contacting a mortgage loan officer at 800-815-BANK or customercare@bankaf.com .

*Annual Percentage Rate (APR). The estimated APRs are based on a $417,000 construction loan at 3.99% with Bank of American Fork’s standard construction loan fees and either a 4-month or 6-month term. The standard construction fees are: 1.5% (4 months) or 1.75% (6 months) origination, $300 inspection, $50 appraisal review, $15 flood determination, $5 credit report (per borrower), title insurance (varies), recording (varies), and appraisal (varies).  Maximum loan amount is $417,000.  Payment example: Assuming that a loan balance of $417,000 was 50% disbursed for a 4-month term, the monthly interest payments are estimated to be $690 and the balloon payment is estimated to be $416,974.  Subject to credit approval.  Other discounts may be available if necessary for loans exceeding $417,000.  Inquire for details.  Only valid in Utah, Salt Lake, Davis, Weber, Tooele, and Wasatch counties.

†An additional 2-month extension with a 0.25% extension fee may be available if necessary.  The reduced-construction-interest-rate program lasts until 12/31/13.

‡The 1.5% or 1.75% construction loan origination fee applies whether the mortgage loan comes from Bank of American Fork or not.  The no-mortgage-fee promotion lasts until 12/31/13.  The mortgage must follow a construction loan originated on or before 12/31/13.  Only valid in Utah, Salt Lake, Davis, Weber, Tooele, and Wasatch counties.

Guest post by Richard Gray, Senior Vice President, Commercial Lending, Bank of American Fork

Now that the U.S. has enjoyed three years of uninterrupted—though slow—economic growth, it’s a good time to look at the economy and see what the current assessment means for Utah businesses. Reading economic indicators is a part of looking to the future, but perhaps there is more to it than just reading the graphs. It would do well to consider scenarios and look for ways to read the signs with open minds and a willingness to act.

Utah’s economic recovery has been underway and at the end of 2012, employment for the year was up 3.3 percent, an increase in 40,000 jobs after 26 consecutive months in job gains. In Utah, average annual pay is up 2.0 percent in inflation-adjusted dollars. New auto and truck sales were up 17 percent and single-family home construction was up over 30 percent. Some are still pessimistic about national unemployment rates, which are declining only slowly, but other economic factors prove that jobs are on the way.

On Friday, February 1, for the first time since October 2007, the Dow closed above 14,000. This five-year high followed a five percent gain in January, the best start to a year since 1997. Analysts say the data shows that the economy’s recovery is still on track, though growth is slow.

This has been the weakest rebound since World War II. Economic growth has averaged less than 2.25 percent since the recovery began and is estimated to have slowed to 1 percent. Some economists point to budget problems as an impediment to fast growth, but some of the deficit is just a natural result of a weak economy. Though the steps to decreasing the deficit seem to be a drag on the economy, steady growth is the ticket to a stronger economy.

This is the good news: the growing economy will eventually be stronger than pre-recession. Some of the wealth that seemed to be prevalent before the recession was propped up by easy credit and runaway spending. The growth following this recession is real, with credit card debt down 16.5 percent since its peak before the recession. This means that households can increase their spending as the economy is improving. Reports show some of this is already happening: imports and exports growing and home prices are increasing.

Even though the government reported disappointing results in the last quarter of 2012—the U.S. trade deficit widened—many note that there is a good side. The pickup in imports and exports show strength in the economy as momentum rises. Not only is the economy built on cycles of recessions and booms, but there are smaller cycles within. Demand rises and I am hopeful that manufacturing rates will increase to catch up.

In Utah, residential construction activity is still down, but beginning to increase. Real estate sales of existing homes have pretty much recovered, and nonresidential construction activity is not far behind. It is expected that by 2015, the value on permit authorized nonresidential construction will be back to its historic average. It will take a few more years of solid employment growth for commercial vacancy rates to make it back down to the 2007 levels.

With economic indicator levels coming up from a very low base, the increases that have happened are significant.

2013 is expected to bring the following:

Employment: Utah’s rate is lower than the national average, but the stronger payroll gains and average annual pay indicate that an increase in jobs will continue.

Housing: Economic forecasters say an improved housing market will be a main driver of economic growth in 2013, despite the prediction that there will be other areas to slow overall economic growth.

Banking: Banking continues to consolidate, with the number of banks reduced but most still have money to lend. Many banks have loosened standards to so that increased credit will power both business and consumer spending.

And since attitude drives behavior, enhanced economic growth soon follows. Employers will believe they can hire, invest and expand; the unemployment rate will decrease; households will re-establish income through employment; and households will have more money to put back into the economy. It will happen when media headlines report the positive sings and people believe that the recovery is real and work to be a part of it.

This article first appeared in the Feb. 18 issue of The Enterprise.

Richard Gray is a senior vice president for Bank of American Fork, which is an Equal Housing Lender and Member FDIC. Richard is the SBA loan department manager and commercial loan department manager for the bank, and manager at the bank’s Murray branch. He serves on the board of directors for nonprofit Kostopolus Dream Foundation and was the chairman for nonprofit Utah Microenterprise Loan Fund, Salt Lake City.