The Connecticut Development Authority ("CDA") Is Your Friend!!!

The CDA is chalk full of good loan programs for Connecticut Companies. The CDA plays a very important role in the Connecticut banking landscape. Not only does it promote job growth or job retention in the State, it also provides a buffer with the wide swings in credit availability supplied by the Banks.

Now, you might think that with any quasi-government program comes with a mountain of red-tape - not with the CDA. The CDA has provided a streamlined, well publicised application process that reduces the time and frustrations felt by borrowers in the State. The application can be downloaded from its web site: CDA Application. But wait, there are very helpful CDA loan professionals ready to assist you with your situation. The CDA suggests calling the CDA loan offices prior to filling out the application (CDA Contact Info).

Before we go into some of the specific loan programs, here are some do's and don'ts with the CDA.

1. Which came first the chicken or the egg, or in this case the CDA or the Bank. Well, its a bit confusing with the CDA as well. The CDA's customers are the participating banks and lenders in the State, and not necessarily or directly the borrower. If you've been turned down by a bank or your astute enough to know that your loan request might cause your lender stress, then study the CDA programs and speak with a CDA loan officer. Get a green light (not a commitment, but an indication from the CDA that your request is in the realm of possibilities) from the CDA loan officer. Then start speaking with your existing lender or any prospective lenders about your loan request and the CDA. Having this knowledge would also so your bank that you mean business.
2. Have an understanding of the timing of the CDA and your lender. The CDA's Board of Directors meet once a month, usually on the 15th if that falls on a weekday. Applications usually have to be approved by the CDA management the last week of the prior month (at the latest). So if you have a tight time frame associated with your loan, then missing a key date might mean waiting another month before your get the funds.
3. Be confident on your projections in particular your employment projections. Remember, the CDA bases its support on your current and projected employment - among other things such as cash flow and collateral. Historically, the CDA has lent or guaranteed $10,000 to $20,000 per employee. The CDA will conduct annual audits on your employment levels, and any shortfalls that aren't easily explainable or extraordinary may result in penalties.
4. Provide the CDA the same information package that you provided your lender and remember your Lender has to fill out an application and provide certain information to the CDA as well. The lender has to fill out an application supporting its request for the CDA support and also has to provide the CDA its loan approval memo prior to the CDA going to its Board for final approval. So keeping tabs on your lender is important. Ask your loan officer if the CDA has the Bank's loan approval document. If he or she doesn't then you might be waiting another month.

The CDA is a great organization and its loan officers are experienced former bank lenders. So communication is important, and they are a good source of information and help. I'd like to now highlight one of the many lending programs offered by the CDA: The Participating Loan Program.

The Participating Loan Program essentially allows the CDA to participate with your lender in the loan structure provided to you - usually on the term or mortgage structure of your loan request. You continue to work with the lender and make your payments. The lender then distributes the CDA's piece of the payments to them. You are still working with one entity - your lender. There are no outside fees required as the CDA will participate with the lender's fees which you signed up for when you signed the commitment letter.

So its a marriage made in heaven - hopefully. The lender receives support to provide the needed loan to the customer (you), while not compromising its loan standards. The customer gets the money required to complete his or her business plan. The CDA provides support to the lender and thereby supports employment growth by the borrower. How does the CDA participation help the lender? The CDA participation is junior to the lender, which means that the CDA essentially has a second lien and the lender a first lien on the assets of the company.

If you find yourself looking for help to get the required money to grow your business and employee base, then the CDA is a great option to consider. If your banker doesn't mention it, then mention it to your banker. For more CDA programs, click here. Good Luck!!

How close should I keep my banker about my business.

To answer that question, it is helpful to understand what your loan officer has to deal with in his or her everyday life.

Did you know how many people look and touch your loan!
In most banks your loan officer has two to three direct and indirect bosses that are repsonsible for loan growth. They are also a watch dog charged to minimize losses on loans. Each boss has ever increasing span of control over loan officers and the sizez of the loan portfolio. Depending on the size of your loan or its current status (past due or current), changes - such as increases or extensions - to the loan agreement could go up to the highest levels of the bank! So for example, if you call your loan officer on Thursday to let him know that you can't meet payroll for your 50 employees on Friday, that problem would make its way up to the top levels of the bank. Well, we all know that scrap (put the right word in there) rolls down hill well the same applies to banks. Your loan officer will probably get a call from the EVP at the bank wanting to know what in blazes is going on with your company. Why, because this issue probably is sympton of something larger - perhaps a loan write-off. The decision/outcome on this problem will come from above, and a lot of pain and embarrsasment will flow down to the loan officer.

It doesn't stop there, there is another side of the bank - a side that you will never see, but has as much impact on your loan as your loan officer and his or her boss does. That dark, secret side of the bank is the credit administrative function of the bank. At least on a quarterly basis (and sometimes monthly depending upon the size and serious nature of the loan problem), your loan officer has to communicate to these unknown giants about the status of your company and the propsects of your ability to repay the loan.

Well, needless to say, I recommend meeting with your loan officer at least once a month alternating the location between the bank and your office. Its important that when visiting the bank you at least say hi to your loan officer's superiors. A human touch goest a long way in the event things go south. So think of your loan officer as the head bowling pin in bowling lane. He or she is the first pen, but there are nine other pins behind that make decisions on your loan. To bowl a strike it starts with the loan officer.

When you sit down with your banker tell him or her about what's going on in your business and industry. Note challenges and opportunities. Many bankers are interested to know that there might be future business down the road. Ask your banker if there are any new products to help improve your business: cash managemnet, foreign exchange, treasury, etc. These brief - limit then to an hour - help cement your relationship and buy you goodwill that you may need to cash in down the road. Remember, your bank is the largest vendor relationship your probably have, and while not an equity partner - they have the ability to make dramatic changes to how and who runs your business. A lunch here and there could make all the difference in the world.