First Business

Business inventory levels are kept low

Thu, 11 Mar 2010 06:00:00 GMT

Businesses trimmed inventories at the wholesale level again in January even though sales rose for a 10th consecutive month. The dip in inventories underscored that businesses remain cautious about restocking their depleted shelves. Read more at www.postcrescent.com.

Business Survey Shows Better Hiring Outlook

Wed, 10 Mar 2010 06:00:00 GMT

The outlook for hiring in the Madison area looks more promising for jobseekers, according to a recent survey of businesses.

Many businesses have been cutting back to shore up their bottom line, but on Wednesday a Manpower survey asking businesses about their employment plans shows more businesses in Madison are feeling positive about the future. See full article at Channel 3000.com.

FOMC Statements: Side-by-side

Thu, 28 Jan 2010 06:00:00 GMT

Corey Chambas, President & CEO of First Business Financial Services, Inc., posted the following article today. This is a side-by-side comparison of the January 27, 2010 to the December 16, 2009 FOMC statements.

The article is posted at http://www.firstbusiness.com/data/linkedin/FOMC012710.pdf

Raising Capital from Angel Investors & Venture Capitalists

Thu, 28 Jan 2010 06:00:00 GMT

Tim Keane, founder of the Golden Angels Network and Board Member of First Business Bank - Milwaukee, recently posted at his blog, Startups and angels: Along the way to success, some advice and thoughts for entrepreneurs negotiating funding rounds. Tim, a successful entrepreneur and investor, gives insight on what investors are thinking as they negotiate with entrepreneurs. The post includes a useful spreadsheet designed to help entrepreneurs understand key points to term sheet negotiations. Follow this link to the post.

About Wisconsin Angel Network
The mission of the Wisconsin Angel Network (WAN)is to build early-stage capital capacity throughout Wisconsin, increasing the number and amount of equity investments in Wisconsin's entrepreneurs. WAN was founded in January 2005 as an umbrella organization providing services and resources to the early-stage investing community. WAN does not operate a fund or make recommendations on potential investments. WAN is a public-private initiative rooted in Governor Jim Doyle's Grow Wisconsin plan and the Legislature's Act 255 initiative, it is operated by the Wisconsin Technology Council. Visit our Members' Page to learn more about the individuals and groups that comprise the Wisconsin Angel Network. To learn more about the Wisconsin Angel Network, download our most recent presentation or read our newsletters. Visit www.wisconsinangelnetwork.com/about/.

About First Business Bank - Milwaukee
First Business Bank - Milwaukee was established in 2000 to provide a full range of commercial banking services to Milwaukee-area businesses and business people. It is chartered as a unit bank with a CEO, not a branch president, and a board of directors rather than an advisory board. This structure allows it to understand Milwaukee-area businesses and respond quickly and proactively to their needs. For additional information, visit www.firstbusiness.com or call 262-792-1400.

The New Banking Environment

Fri, 2 Oct 2009 05:00:00 GMT

A solid relationship with your banker is more important than ever before. Why is that?
With the current economic environment, surprises (for both the banker and client) are more stressful than ever to deal with. Having a solid relationship with your banker is now even more important in order to work together and get through difficult times. Submitting financial information on time, and delivering difficult news as early as possible, is important. Telling your banker upfront shows concern and a proactive approach on the client's part.

What is the most common misconception people have when talking to banks about financing?
Many clients feel that a banker is only interested in a company's numbers or performance. Although the numbers are very important, bankers also rely heavily on the strength of the management team, projections, and the company's business plan.

Read full article.

Looking Ahead

Thu, 1 Jan 2009 06:00:00 GMT

Optimism for 2009 Tempered by Economic Realities

Michael Noone sees better days ahead for the economy of Northeast Wisconsin. Given all that's occurred in 2008, from the housing market collapse to the financial freeze to creeping unemployment and finally the roller coaster that is Wall Street, it's hard to find much to be optimistic about. The country is now officially in recession that many predict won't end until 2010.

Yet, Noone is optimistic. So are a lot of people who do business in Northeast Wisconsin.

"I think that from any perspective, 2008 was not a good year," says Noone, president of First Business Bank - Northeast. "For 2009, people in this area are looking for a better year."

Noone's optimism is not just wishful thinking, but a reflection of the responses to a recent economic survey of the area commissioned by First Business Bank and conducted by the A.C. Nielsen Center for Marketing Research at the University of Wisconsin - Madison School of Business. The results were presented Dec. 18 at the First Business Bank Economic Event at Butte des Morts Country Club, sponsored by the bank, the University of Wisconsin - Oshkosh, and Insight magazine.

Conducted between September and October, the survey of CEOs, CFOs, presidents, and business owners found that many businesses had a flat or down year in 2008, with almost as many businesses - nearly 43 percent - reporting an increase in profitability in 2008 as there were reporting a decrease, also about 43 percent.

The optimism comes from looking at expectations for 2009, where more than 70 percent of those surveyed project they will at least do the same as 2008, if not better. The number of businesses forecasting a decline in profitability drops to slightly under 30 percent.

Noone says the results are a reflection of the regional economy.

"This is the Valley. The coasts have the problems first, and we don't usually see the problems as quickly or as extremely," he says. "This is a conservative area. We are still doing well from a manufacturing perspective."

Some of the optimism for the 2009 outlook is tempered by the reality of when the survey was conducted. The responses were collected just prior to the crises in the credit markets. While businesses had been facing recessionary pressures for some time, the extent of the problems nationally erupted into the public consciousness after the data was collected.

That can't be ignored when looking at the projections for 2009, says E. Alan Hartman, provost of the University of Wisconsin - Oshkosh, who led the panel presentation last month.

"The full impact of what has happened recently may not be reflected," Hartman says.

That may not be a bad thing, says Scott Converse, director of technology programs at the UW - Madison School of Business.

"There was a decline that had been occurring throughout that time span, but the volatility that we have felt and heard and seen daily through the news media was not present," says Converse, who led the panel discussion of the results for Dane County. "It gives us a more accurate estimate tool."

The results are consistent, and there does seem to be a mood of optimism heading into 2009 for the local economy.

Of course, some sectors see things more brightly than others. The technology sector reported results that were more negative than many other business sectors. It was the only category where more than 50 percent projected a decline in profitability in 2009. Yet, the sector is quite bullish on sales opportunities for 2009, with 71 percent reporting they expect sales to increase. Part of that anomaly may be the smaller number of responses by businesses in the technology category. About 2 percent of the businesses providing data for the survey classified themselves as technology companies.

For employees, 2009 is projected to look a lot like 2008. While there were some major layoffs in the region, most companies reported modest changes to both payroll and the number of employees.

Most changes in the number of employees and wages tended to be in the 1 to 3 percent increase range for 2008. For 2009 more than 85 percent of the companies surveyed reported no change or an increase in employees, while more than 95 percent see wages staying the same or increasing.

Overall, the survey shows most businesses have a moderate expectation for 2009. Most companies are projecting revenues to increase and few are expecting cost increases. How much the recent economic turbulence changes that outlook remains to be seen, Hartman says.

"I think you have to be careful when you frame the discussion, but you can also talk about the resiliency of Wisconsin," Noone says. "We tend to not have the highs and lows of other areas."

Key Results

The First Business Economic Survey was conducted in September and October of 2008 and was sent to 7,500 businesses in Northeast Wisconsin. A total of 690 responses were received. The survey asked questions regarding eight economic indicators: sales revenue, profitability, total operating costs as a percentage of revenue, capital expenditures, number of employees, wage changes, pricing, and operating capacity.

Sales Revenue

2008 Results
54.4% increase
8.6% no change
37.0% decrease

2009 Results
53.0% increase
17.6% no change
29.3% decrease

Profitability

2008 Results
41.8% increase
14.6% no change
42.6% decrease

2009 Results
44.9% increase
26.2% no change
29.4% decrease

Employment

2008 Results
25.6% increase
49.8% no change
24.6% decrease

2009 Results
23.3% increase
62.4% no change
14.3% decrease

Wage Change

2008 Results
69.1% increase
24.9% no change
6.1% decrease

2009 Results
62.1% increase
33.3% no change
4.6% decrease

Executive Q&A - Mark Meloy

Sat, 13 Dec 2008 06:00:00 GMT

Madison Bank Head Targets Niche Market

First Business Bank - Madison has no teller windows, just one office and fewer than 1,500 customers.

But the bank has $735 million in deposits locally and has the sixth-largest deposit market share in the Madison area. It has increased deposits by 84.5 percent over the past five years.

Founded in 1990 and part of the publicly traded First Business Financial Services of Madison, the bank has stuck to a purely business model instead of trying to expand into retail banking, said president and chief executive Mark Meloy.

First Business Financial Services has six subsidiaries including business banks in Madison, the Milwaukee area, and Oshkosh-Appleton, as well as First Business Trust & Investments, First Business Capital Corp., and First Business Equipment Finance.

Meloy grew up in Platteville and graduated from Loras College in Dubuque, Iowa. He came to First Business Financial Services after 17 years at what now is U.S. Bank, becoming head of the Madison bank in 2006.

Q: How is First Business Bank different from other banks and what has contributed to its success?

A: The obvious things that one would recognize right away are we don't have a multitude of branches. We have one location here in Madison, one location in the Milwaukee area, and one in Oshkosh and Appleton - sort of one per community.

The reason we do that is because we've carved out a very particular niche of the marketplace - small business and low end of the middle-market-type businesses. For that marketplace, the numbers of locations are less important because those types of bank clients get their deposits to the bank in a number of different ways and in mostly fairly high-tech ways, either electronically by ACH (Automatic Clearing House), wire transfer, or over the Web through our remote deposit product. In the pre-Web days, we had - and we still have - a courier service.

The second thing is the number of clients that we have. A bank our size would have about 20,000 to 25,000 account holders if we were a retail and commercial bank. With our business bank focus, we probably have 1,800 clients across our company. In Madison, we probably have 1,300 to 1,400 clients.

The comparison I like to draw is to think about the teacher-to-student ration in school systems. I sort of describe it as the banker-to-client ratio in our model, which is very much tilted to the advantage of our clients where they get a lot of personal attention that enables us to be very proactive in the relationship. It's frankly related to the growth we've been able to enjoy. As we bring on new business, we're not losing existing business out the back door because we are paying attention to who our clients are.

Q: Has the bank made any adjustments in lending or underwriting due to the struggling economy?

A: Some people have accused us of being conservative and I've quickly turned it around and said we're not conservative, we're consistent. I don't think we've made any significant changes in underwriting and I would emphasize that we look at lending the same way all the time. During the boom years, we were doing it the same way then as we did 10 years prior to that and the way we do it today. Did we refine things over time? Absolutely. Technology allows us to do that and information allows us to do that. But the basic tenets of underwriting we've tried to adhere to and have throughout our history.

Confidence plays a big part in credit on both sides. Certainly there are opportunities out there. We have looked at some very nice new opportunities in the last couple of months in the height of the bad financial news nationally where the prospects have been banking someplace else for an extended period of time and for whatever reason their relationship with their longtime previous provider has changed. That's created some discomfort for them and created an opportunity for us to show them our model.

We do have commercial real estate as part of our loan portfolio. That's a common characteristic of most Midwestern banks and Dane County area banks. Through the history of our company, we've had very good loan-quality experience.

Q: Do you think business banks will avoid the financial problems that have afflicted banks focused on home mortgages or do you think the impact has just been delayed?

A: There are other business-type banks across the country and we measure ourselves against some of those banks in key factors, particularly credit quality. We stack up very well against those other business banks. We've really taken the model probably further than other business banks because we're not trying to serve the mass market. We don't have teller lines. Other business banks have kind of tweaked into that area.

Just saying you're a business bank doesn't mean you're immune to national financial problems. We benefit from the Madison local economy. We're not immune to the economic woes, but we don't get the pendulum swings they do on the coasts. I think the purity of our model allows us to serve our clients better than other banks.

I don't think we're at the end of the national financial problems. I don't think we've bottomed out totally yet. In a Dane County economic survey we did recently, one of the telltale questions in looking forward to 2009 was that about 60 percent of the business owners projected 2009 to be better than 2008. This is the sixth year we've done that survey and it's the first year that's been under 80 percent. I think there's less confidence out there.

Q: What are the plans for First Business Bank over the next year regarding expansion or new products?

A: Over the past two years, we've invested in people and business units. Where we are now is a time to continue to leverage those investments. We put a bank in the Fox Valley a couple years ago. We've positioned our overall company to be nimble as far as what economic conditions present.

Mark Meloy is president and chief executive of First Business Bank - Madison at 401 Charmany Drive. The bank, which is part of First Business Financial Services, is a niche player in the Madison banking market.

Business Credit and Northeast Wisconsin

Tue, 2 Dec 2008 06:00:00 GMT

Credit Remains Available for the Creditworthy

Northeast Wisconsin is frequently said to be more level, economically speaking, than the East or West coasts -- the peaks are not as high, but the valleys are not as low.

If true, that appears to be a positive for Northeast Wisconsin businesses seeking credit. So far, according to area business lenders, the business credit freeze and the mortgage crisis that staggered the economy in the fall has had little effect here.

"The general environment is there continues to be available credit, I think, in the Valley for good solid creditworthy companies or projects, so I don't think that's changed," says Dave Coggins, president of the Business Lending Group, a consortium of four area credit unions.

"There's plenty of liquidity available for good customers," says Jim Wilson, president of The Business Bank in Appleton. "We still assess credit based on how they're doing."

"We haven't been touched by the mortgage debacle, so our situation is significantly different from our perspective," says Mickey Noone, president of First Business Bank-Northeast in Appleton. "From our eyes, it's all good; we don't have the problems retail banks currently have.
"From our eyes, it's a world of opportunity -- our competition is the big regional and national players, and it's our opinion that, when they make changes, it's at the top and it filters down so it's not reflective of the local situation."

Effects of the national credit crunch have been felt in certain business sectors and on the margin.

"I don't think that's necessarily affecting real firm institutions dramatically," says Coggins. "I think concerns about the economy, as they always do, mean a little less willingness to stretch on unproven projects." He adds that had the national economy been better, credit standards might be "a little less stringent," but that would be based on the economy.

"You need to focus on quality and keep your standards high," says Noone. "Here in Northeast Wisconsin, anyway, manufacturing is going quite strong; even in the commercial real estate market, there's still some opportunities, but it has slowed considerably."

Wilson says land development is "a difficult environment, and will be. It affects things depending on the ripple effect -- for instance, the subprime situation; it depends on what industry you have." Small manufacturers, however, are doing well now, he adds.
Wilson is not seeing payment problems among his customers, but "a precursor of our business to that is margin issues, profitability, but our delinquencies are pretty good."

Coggins believes underwriting standards are tightening on projects that are "not proven or a company that's trying to expand without a long track record -- the entrepreneurial ventures that need capacity but don't have a track record tend to get squeezed out at a time like this."

"You certainly can't rely on what you've done in the past," says Noone. "Certainly most banks have changed their standards, when it comes to policies and procedures, when it comes to due diligence; you have to look at it with both eyes open."

Another factor might be whether a financial institution is based in this area or is part of a larger national company.

"We've been able to take advantage of some of these situations and pick up some nice clients," says Noone.
"Locally owned financial institutions tend to be a lot more steady," says Coggins. "In times like this they tend to not be so driven by national macroeconomic conditions."

"There's a drive for liquidity for large banks -- most banks, if they're growing at all, use some wholesale," says Wilson. "There's plenty of money available, but it affects the price of money, which affects the customer."
One unknown is the impact of the consolidation of national banks as a result of the financial industry bailouts -- Bank of America's purchase of Merrill Lynch and JPMorgan Chase's purchase of Bear Stearns and Washington Mutual Inc.

"How that plays out and how that impacts local institutions is something of interest, but I don't know how to predict that," says Coggins.

Is the stereotype of lower highs and higher lows in Northeast Wisconsin true?
"Certain industries are always much more hard hit, but I think whether it's housing prices or economic impact, we don't get impacted as much by spikes and valleys," says Coggins.
Wilson says both the economy in general and housing in particular are "better" now in Northeast Wisconsin -- "We've never had the great highs or lows."

"The Midwest is not on either end of the spectrum, and most companies have felt this coming for some time," says Noone, pointing to changes in the paper industry.

While business credit appears at least somewhat immune to the national economy at the moment, that may not remain the case.

"The economy is weakening -- I don't think there's any question, especially on the retail side, and that's two-thirds of the economy, so that's going to definitely affect us," says Wilson. "To that extent, what happens in the nation affects us."

"The challenge for financial institutions is to be as steady as possible, not overly optimistic in good times and too restrictive in bad times, so they can have a steady, responsible financial source in good times and in bad," says Coggins.

Northeast Wisconsin bankers still seem optimistic that this area will do better than the nation as a whole. "What kind of people weather a storm like this? Conservative people," says Wilson. "A great deal of this problem was created by excessive leverage. Most of the people we deal with are conservative people with strong balance sheets, so they don't have as much leverage. It's not that they won't borrow, but they're not leveraged to the same extent as other parts of the country."

Noone predicts that 2009 will be "...relatively the same as they are today, but improving thereafter. We're not anticipating a drawn-out economic impact. There are still good clients out there that are operating successfully in most industries; you just have to find them."

Commercial Real Estate Forecast for Dane County Warm to Partly Cloudy

Wed, 4 Jun 2008 05:00:00 GMT

The column below reflects the views of the author, and these opinions are neither endorsed nor supported by WisOpinion.com. This year's news headlines paint a cloudy picture for real estate in general. In fact, the residential real estate market across the country has seen some significant price declines. This is complicated by the sub-prime credit mess and a slowing economy. A quick recovery is unlikely.

What few people recognize is that the forecast for commercial real estate is not quite as cloudy. Commercial real estate includes office buildings, warehouse and manufacturing facilities, and retail space. Commercial markets are not facing the selling pressure of residential markets. With the exception of some retail spaces, most commercial markets are in equilibrium with vacancies running about 10 percent. When vacancies rise above 10 percent, owners are forced to give rent concessions. When they fall below 10 percent, demand exceeds supply leading to more building.

The strongest commercial properties are in the office building, warehouse, and manufacturing facilities. Lease rates are stable and growing modestly. Landlords should be able to increase rents in line with inflation. And unlike residential properties, values of commercial properties in these markets have not fallen.

On the other hand, retail spaces are facing some challenges due to a declining economy and falling consumer spending. The residential refinancing boom of a few years ago, fueled by rising residential real estate prices, fed a lot of consumer spending. Decreased home equity is now having the opposite effect. This puts pressure on retailers causing some to put expansion plans on hold, or worse, to close up altogether. As a result, we forecast fewer new retail leases and project that some existing leases may lapse.

Fortunately, Dane County continues to have a stable real estate market overall. The region has had a strong and growing economy. But a few years ago, we thought Madison real estate showed signs of being overpriced with building owners commanding prices that weren't supported by the cash flow, especially in the residential rental markets. Today, the overall market is more fairly priced. Commercial real estate prices in our market are rising at a slow but steady rate.

Commercial real estate investors may be surprised by the impact, or actually the lack of impact, of declining interest rates. While the Federal Reserve has dramatically reduced short-term interest rates, this has actually "reshaped" the yield curve into a more traditional upward slope with lower rates for short-term debt and higher rates for longer maturities. Prior to this year, the yield curve was actually inverted with some shorter-maturity debt commanding higher rates. For most commercial borrowers, this has meant mortgage rates have not declined, and in some cases, have even risen.

Going forward, with a few caveats such as the uncertainty in retail markets, we should continue to see a relatively healthy commercial real estate market. Prices should rise gradually, in line with inflation. If you are considering purchasing or refinancing commercial real estate, keep in mind the following tips:

1. Carefully consider whether you finance your purchase with fixed or variable rate debt. Fixed rate debt allows you to lock in an interest rate and create a predictable expense and more predictable cash flow, especially if you have strong tenants. On the flip side, some floating rate debt holders have benefited of late as interest rates have come back down. Choosing variable rate debt can be risky, but if rates stay low it may be a way to save on interest expense. Some businesses chose a combination of both fixed and floating debt.

2. Do a thorough analysis of your tenant mix and the underlying financial strength of your tenants. A tenant in default and vacancies are property owners' worst enemies. The foregone rent can never be replaced.

3. Cash is king. It is important to point out to a lender that you or your business has strong cash reserves allowing you as an owner to carry the property in troubled economic times.

4. If you don't have cash or the ability to come up with a 20 percent down payment, it does not mean you are out of luck. There are a number of local and national organizations who will provide financing to small businesses. An example locally is the Dane County Development Corporation. For a listing of development organizations in Dane County communities, visit this site.

While the current credit environment may make finding financing on some projects challenging, we believe lenders and borrowers alike are being prudent in today's economy. This is healthy for everyone.

-- Larson and Karnick both work for First Business Bank, Larson as a senior vice president and Karnick as an assistant vice president. For more information on various commercial lending strategies, visit the First Business Website .

Just a Minute With Dave Vetta President & CEO, First Business Bank - Milwaukee

Fri, 9 Nov 2007 06:00:00 GMT

Company address: 18500 W. Corporate Drive, Brookfield, WI 53045

Company Web site: www.firstbusiness.com

Industry: Banking

Number of employees: 20

Education: Certified Financial Planner; master's degree in business administration from the University of Wisconsin-Whitewater and a bachelor of science degree from Carroll College; additional advanced studies at Northwestern University and University of Virginia, Darden School of Business.

Family: "I am most proud of my family: my wife, Katy, and our three terrific daughters."

What was the smartest thing your company did in the past year?

"Investing in our Milwaukee team. We've been able to complement our core team and add five very experienced people in the last eight months."

What's new at your company?

"We have five new associates to complement our terrific team of people, bringing additional commercial real estate, manufacturing, investment management, and private banking expertise."

Do you plan to hire any additional staff or make any significant capital investments in your company in the next year?

"We are planning to continue to invest in our team with as many as four additional people next year. We intend to continue to grow at a rapid pace, while ensuring its prudent and sustainable growth. We seek growth and won't compromise our service model to our current clients."

What will be your company's main challenges in the next year?

"We want to continue to build on our seven-year legacy in metro Milwaukee. Our biggest opportunity is telling our story - over 90 percent of our clients tell us they are satisfied. So, our story for current and prospective clients is, `Try us and you'll enjoy our unique service model.'"

What's the hottest trend in your industry?

"An intense focus on small-business owners. We have always focused on the business owner. The business owner has needs related to the business finances and also to their own finances - they are closely linked. Both need to be considered when proposing solutions. Many banks say they are focused on the business owner, but that's been our company's distinction since inception 17 years ago. Among our clients, we're seeing more discussion about leadership and succession planning. We've added capabilities to help them address this."

Do you have a business mantra?

"Integrity in all you do. I strive - and I ask all our people - for an alignment of their personal and professional goals and passion. We need to strive for an alignment of the interests and values of our clients, shareholders and employees."

From a business standpoint, who do you look up to?

"Stephen Covey, who wrote `The Seven Habits of Highly Effective People." It has stood the test of time. Personally I look up to a former boss of mine who I had for 20 years at JP Morgan. He remains a mentor and a friend. I have learned a great deal from him."

What was the best advice you ever received?

"My parents impressed upon me to respect people, work hard, strive for balance, be humble, and have fun."

What's the funniest thing that ever happened to you in your career?

"We used to celebrate a lot when we hit milestones in the company. So we had a lot of fun playing roles and performing in skits. I have played Michael Jordan; some of it was caught on film. Only through the magic of video will I ever dunk a basketball."

What do you like to do in your free time?

"Reading, traveling, biking, and being a terrible piano student."

Taking Care of Business

Mon, 23 Jul 2007 05:00:00 GMT

As the area's first business-focused financial institution to offer cashless banking, First Business Bank - Northeast may be the perfect resource for your business - or it may not be.

And that is as intended.

"We're not trying to lure everybody in," said Mickey Noone, president of First Business Bank - Northeast. "It wouldn't allow us to service everybody the way we think they should be serviced. We're not trying to do everything. We have demonstrated capability, with products and services that support that capability."

As an enterprise based in Madison with a second location in Milwaukee, First Business Bank entered Northeastern Wisconsin last fall with a specific business model in mind, one based on what it has done successfully at locations that operated since 1990 and 2000, respectively.

It's aim was to provide clients primarily in the manufacturing, wholesale, distribution, and commercial real estate industries with convenience and one-stop, high-end services, making their banking experience more efficient and better for the bottom line.

However, its approach in this region is slightly different. "Our banks are typically set up as unit banks, which means they're separately chartered and have a separate board of directors and decision-making authority," Noone said. "We were pursuing that path up here as well until we came upon the automation that was available. Once we recognized that there was a lower cost of operation up here, we engaged it."

First Business Bank - Northeast did so by setting up as an LPO, or loan production office. It has its own regional board of directors hailing from communities from Fond du Lac to Green Bay, handles financing and similar services, but does not accept deposits face-to-face.

"When you walk into a bank, what do you see? You see a teller line," Noone said. Not so at First Business Bank - Northeast, currently operating on Oregon Street in Oshkosh and scheduled in October to open its main location in the building under construction in Appleton at Highways 41 and BB.

Instead, clients handle their transactions electronically using password-protected online banking, remote deposit appliances, and, soon, branch automation equipment that handles petty cash needs much like an ATM.

"We took a step out of the process and gave that to the client to control fully, and that allowed us to drop our costs significantly," Noone said. "That's the endgame of the efficiency created. It gets passed along to the client."

Eliminating the transactional element from its purview also allows First Business Bank - Northeast to focus its efforts where its expertise lies. "I think that's probably the most powerful thing we bring to the table," Noone said. "We're no longer talking about why a teller made a mistake on their deposit. We're talking about big issues, and so the quality of those contacts went up substantially."

Small to medium-sized clients tend to benefit most from a relationship with First Business Bank - Northeast, according to Noone. "In our minds, it's $1 million of need, whether that's commercial lending, treasury management, trust, or a combination of the three. That's how we're pursuing clients - clients that have multiple needs that want a high level of service.

"The business model is a team approach. We represent trust, leasing, asset-based and traditional commercial lending, and treasury management," Noone said. "We can get all five of those people in front of you in 15 minutes, so it's very easy for us to bring all those things to the table."

Thus far, First Business Bank - Northeast has attracted 15 to 20 clients accounting for about $40 million in commitments. "It's been a pretty rapid growth cycle," Noone said.

Influential in that growth is the asset base from which First Business Bank - Northeast is able to operate. "One of the great advantages is that we get to leverage the whole organization," Noone said. "If I'm starting a unit bank, my lending limit is a percentage of my capital. As an LPO, I get to lend based on Madison's capital which is a much bigger gun to hunt with."

Nearly $800 million big, as a matter of fact. Noone said, "We can lend $12 million to $14 million per client, whereas I'd only be able to lend about $1 million per client (as a separate unit bank). It's much more efficient."

Certain types of operations are notably absent among First Business Bank - Northeast's clients, mostly because the cashless approach it utilizes will not work for them. "The high cash needs people - a grocery store, a retail shop - are not going to be good clients of ours," Noone said. "While we can produce cash, it's not going to be in quantities that they're going to find acceptable."

"Our model is focused on critical mass. We want fewer, larger clients so we can produce the service we think they deserve rather than trying to be everything to everybody."

Noone admitted one disadvantage to the cashless system First Business Bank - Northeast employs - one he quickly turned into a positive.

"One of the biggest concerns we've had is that most people, when they went out and made the bank deposit, went and grabbed coffee or grabbed lunch. So, they don't get to do that anymore," he said. "I think they're shocked at how easy banking can be and how much more time they have to focus on their business, which is really the key."

Back to Work - On Their Own Terms

Sat, 12 May 2007 05:00:00 GMT

BROOKFIELD - Michael Gingras retired as vice president of M&I Bank in Brookfield at the end of January with the intent of taking 60 days to figure out what he wanted to do with the rest of his life.

But within less than two weeks, three different kinds of banks called him, asking him to come back on a part-time basis as an adviser or mentor to the company.

"It got me thinking maybe I should be reconsidering this whole process," Gingras said. "There is a crying need for people that have experience, that are seasoned veterans, at whatever level it would be, to help out the junior generation."

Gingras is part of growing number of workers who are being asked to come back in flexible, part-time advisory roles after retirement.

Scott Nissen, president of Waukesha staffing firm Nissen Staffing Continuum Inc., said the combination of a talent shortage with rising health care costs is forcing employers to search for senior workers who can have a tremendous impact during a shortened work week.

"The demographics are changing," said Nissen, a past president of the Wisconsin Association of Staffing Services. "More workers are leaving than coming in and employers are looking to create alternative staffing arrangements or plans."

Gingras decided to take a job as vice president of business development for First Business Bank of Brookfield, a Madison-based bank that primarily serves mid-sized businesses.

He was hired by First Business Bank of Brookfield President and CEO David Vetta, who also came back from retirement to run the company nine months ago.

"Many people in (Gingras') situation have worked hard and they don't want to just stop working," Vetta said. "I think people will be working into their 80s and not because they have to. But because they want to and I think that makes all the difference in the world."

Advisory Role

Nissen said hiring retired talent on a part-time basis is a concept that started about four years ago and really gained traction during the last two years.

He said acquiring and finding talent is difficult right now and hiring workers on a part-time basis saves employers the cost of benefits.

From a worker's standpoint, he said, many older workers need the supplemental income and with the overall increase in life expectancy, people are interested in staying active in the business world.

"Senior workers are willing to work part time for the extra income," Nissen said. "But for others, working fills a missing piece for them."

Michael Gingras, vice president of First Business Bank, discusses his business in a conference room at the Brookfield branch Thursday. Gingras is among a growing number of retired workers drawn back to work to serve in advisory roles.

Vetta said he was interested in Gingras because he knew his interests and curiosities align with the bank's overall philosophy.

With $800 million in assets, First Business Bank of Wisconsin has the largest market share of business clientele in Madison and is looking to grow its share in the Milwaukee area.

David Vetta, president and CEO of First Business Bank of Brookfield, said he hired Gingras because he knew Gingras' interests were aligned with the bank's philosophy. Vetta returned to work from retirement to run the bank nine months ago, he said.

"At this stage he very much is trying to and has a history of acting as an adviser and consultant to businesses that are new to that growth as we grow ourselves."

Gingras said he spends the majority of his day "out on the street trying to develop relationships with existing" companies but also wants to work with some of the bank's junior officers. "We do have some officers on the junior side that I am trying to get some of my thoughts through (to)," Gingras said. "More than anything else, (I show them) the way that didn't work for me so they don't make the same mistakes I did."

The Next 10 Years

Gingras said he works about 30 hours a week and is able to attend some meetings via telephone. For now, he enjoys focusing solely on the business client and business owner almost exclusively, while at the same time having the flexibility to explore other interests, he said.

"Retirement is overrated," Gingras said. "It is fun doing this three days a week. The bank makes it very flexible for people like me."

Nissen said the trend of hiring retired workers stretches across all industries and will likely continue.

Vetta said the bank has created a situation where Gingras should be able to work there happily for the next 10 years.

"People have choices," Vetta said. "And he found a choice that I think is a balance for him for quite some time to come that utilizes his skill sets, that piques his interest and curiosity and (allows him) to spend a good amount of time with his wife and his family."

First Business Bank Fills Gap with Mezzanine Financing

Fri, 11 May 2007 05:00:00 GMT

First Business Bank-Milwaukee is partnering with Chicago-based Aldine Capital Fund L.P. to offer mezzanine financing to clients in southeastern Wisconsin.

First Business Bank-Milwaukee claims to be the only Wisconsin-based bank offering mezzanine financing. It is an independent bank owned by First Business Financial Services Inc., which also owns First Business Bank-Madison and several other financial firms. The bank is based in Brookfield. It has about $118 million in assets and 15 employees.

Aldine Capital Fund typically invests in small to middle-market companies with between $10 and $150 million in revenues. The fund typically invests between $2 million and $8 million.

Mezzanine financing is a tool that can fill a financing gap between an investor's equity and a traditional bank loan. The tool is often used to help fund growth, a recapitalization, acquisition by strategic or private equity buyer or other ownership change.

The new service reflects First Business Bank's goal of serving the owners of privately held companies.

"We want to go deeper with our clients and client base," said David Vetta, president and chief executive officer of First Business Bank-Milwaukee. "We looked at the life cycles of our clients. We want to help them buy businesses or build them. And it made sense to partner with someone who has already built this solution."

Adding mezzanine financing through the partnership with Aldine gives First Business Bank-Milwaukee one more tool to differentiate the bank from its competitors, Vetta said.

"We want to be a consultant and advisor to our clients," he said. "We need to understand their objectives, then act. We can distinguish ourselves with products, services, and service levels. This is another added offering that we can bring to the table."

Mike Revord, managing partner with Aldine Capital Fund, said partnering with a business-focused bank in southeastern Wisconsin will help the fund gain access to businesses here.

"We're in the market for lower middle-market businesses," Revord said. "And we're in the same market that First Business Bank serves. Their laser-like focus of serving privately held middle-market businesses - Aldine targets those for investment."

One scenario where the bank might steer a client toward mezzanine financing is when the client is considering selling a minority share of the business to pull out some equity, said Frank Cheswick, partner at Aldine Capital.

"Mezzanine is a good use for that, when they want to take some of the chips off of the table," he said. "We're not a control investor - most private equity firms want to have a controlling block. We're a logical first stop when (business owners) are looking to sell a minority share." Offering its clients access to mezzanine financing is part of First Business Bank-Milwaukee's goal of being a one-stop shop for business owners.

"The name wouldn't necessarily infer the case that we care for their personal needs," Vetta said. "But we are a boutique for the business and business owner, and we need to be sure we address both ends of that."

Funding to Grow

Thu, 1 Feb 2007 06:00:00 GMT

Mezzanine funding now available in Wisconsin

Success requires growth. Growth requires funding. And funding requires resources.

For existing business owners looking to expand or potential business owners seeking an acquisition, it is a recipe for endless frustration. Well-heeled businesses that are for sale often carry an asking price in excess of the market value of the tangible assets. This premium, often called "blue sky" or the "air ball" in the purchase price, can be difficult for traditional bank financing to fully fund or finance. The seller asks for that premium because the business has a history of profitability as well as a unique product or name recognition in their industry.

Businesses typically sell for some multiple of profitability, plus non-cash expenses (i.e. depreciation) and interest expense that all together is commonly referred to as "cash flow;" it is also known as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). Whether you are attempting to purchase a competitor's company or navigate a transfer of ownership, if the current owner can show a history of solid cash flow, it is very likely that he or she can expect to realize a premium in the price of the business over and above the value of its assets.

For middle-market companies, making such a purchase - at such a premium price - can be difficult. Few middle-market businesses have the resources for major growth through acquisition, expansion, or product-line development without the support of a bank, and banks generally limit the available dollars borrowed based upon the value of the tangible assets available as collateral. However, if the purchasing business is a market leader with a solid management team and a strong track record, finding flexible growth funding may be easier than one thinks.

Mezzanine financing - a type of debt aptly named after the balcony between the first and second floors - helps middle-market businesses meet their full financial needs by filling the gap between equity capital and collateral-based debt. It's a crucial funding resource for thriving companies looking to expand; companies that until recently had very few options for meeting million-dollar investments.

What sounds counterintuitive is actually true: In Wisconsin, like many states, securing $25 million is often easier for business owners than obtaining $5 million. That is because smaller, community-based financial institutions rarely offer mezzanine financing, while national providers typically grant such unsecured debt to larger companies in larger denominations. But now some lenders are breaking with tradition.

Dane County's First Business Bank has partnered with Aldine Capital to provide mezzanine financing for businesses seeking $2 to $8 million, a first among Wisconsin-based banks. The collaboration places them at the head of a growing number of progressive financial institutions that recognize mezzanine financing's flexibility is uniquely suited to help medium-sized enterprises become big ones.

Mezzanine funding focuses on proven track records. Lenders look at a prospective company's long-term performance, market position, earning history, and cash-flow consistency. Does the company fill a certain market niche? Is it a part of an industry on the upswing? What are the company's long-term and short-term goals? These common considerations differentiate mezzanine financing from angel investments and venture capital, which are often based upon an idea, concept, or business strategy yet to be fully tested or proven.

For that reason, businesses that combine healthy balance sheets with quality management have the advantage in this funding arena, especially when their capital needs are clearly defined. Management buy-outs, acquisitions, expansions, and ownership changes are all customary reasons for a mezzanine capital search.

It is also an attractive alternative for entrepreneurs worried about losing ownership or autonomy. Because smaller amounts of equity are exchanged in mezzanine transactions than in venture capitalization, owners stay securely in charge.

While mezzanine financing is an invaluable capital resource for acquisitions, expansions, and product development, middle-market companies may find that their capital comes with an even greater advantage: the investor.

Most mezzanine financers are sophisticated, strategic investors, people, and institutions that can add valuable insight to your company. Plus, mezzanine financers aren't looking for a fast buck or a quick killing. They're long-haul investors who want to maximize a company's potential over years without taking control. Such an attitude can make them appreciative when things go well, yet flexible when the best laid business plans go awry.

To be successful, entrepreneurs interested in mezzanine funding should seek banks that demonstrate a strong commitment to small businesses in their community. When growing your business depends on gaining a financial partner, working with a bank that supports your business, understands your market, and believes in your potential can be the most important thing of all.

Mark Meloy is president of First Business Bank - Madison. He has over 20 years of banking experience, including specialized work in commercial lending and mergers and acquisitions.

Taking Care of Business: Corey Chambas

Tue, 1 Aug 2006 05:00:00 GMT

As CEO, Chambas has led First Business Bank on a path of record growth

Corey Chambas has worked in the commercial banking industry for 22 years, specializing in cash management and commercial lending. A graduate of the University of Wisconsin, he has also completed several advanced commercial lending programs including those of Darden (University of Virginia) and Kellogg (Northwestern University). In addition to his role as CEO at First Business Bank, he is also a director of First Business Capital Corp., a director of First Business Leasing, LLC, a board member of Mortenson, Matzelle and Meldrum, Inc., Business Advisory Board member of Bellbrook Labs, LLC, President of the board of the Foundation for Dane County Transition Schools, member of the Strategic Campaign Issues Committee for the United Way of Dane County, and a member of Madison Breakfast Rotary. In 2003, Chambas was presented with North*Western Financial Review's `Rising Star' award in recognition for his outstanding industry accomplishments and community involvement.

BW: Tell us a little bit about growing up in Milwaukee.

We lived in the central part of the city until fourth grade when we moved to Mequon. It's not the Mequon we know today - back then I could walk out our door and go pheasant hunting!

I had a great childhood. It's common to hear people talk about the traumatic things that happened to them growing up, and that almost makes me feel guilty. I had lots of fun. I didn't get into too much trouble. I played baseball, basketball, and football in high school, which was a blast.

My father was a factory worker for Evinrude. It was just assumed that I would go to college. He never liked his job. He did it to earn a living and support his family and he wanted me to have more than that.

BW: How did you manage your money when you were growing up?

I was a saver by nature. I worked all through high school. My first job was stocking shelves at a pharmacy. I knew I was going to be paying my way through college so I saved as much as I could.

BW: Did you have a strong desire to enter the world of banking?

Not at all! I started as a chemistry major at UW-Madison in 1980 because I'd been on an accelerated science track in high school. But I really didn't like my 7:45 a.m. chemistry lab or getting up that early in the morning. So I changed my major to wildlife ecology. Then I learned that to get a decent job in that field I would need at least a master's degree. That was disappointing news because my personal finances, including my two scholarships, would only get me through four years of school. One day I was talking about my situation with some graduate chemistry students. They started asking me what I was good at and what I wasn't good at and eventually determined I was "well balanced" enough to be a business major! So I marched up Bascom Hill and changed from wildlife ecology to business. Then I discovered there were lots of business majors to choose from - I liked the sound of finance, investing, and banking, so that became my major. I graduated in 1984 with a bachelor's degree in business administration.

I really knew very little about commercial lending when I graduated. During my interviews with banks they'd ask me if I wanted to be in commercial lending, and of course I said "sure!" I learned more about commercial lending through the interview process than I ever did in the classroom. I was invited to interview with First Chicago Bank and suddenly realized that if I took that job it would be the Bears on TV every Sunday, which made me realize I had to find a job in Wisconsin. M&I in Milwaukee hired me - by the time I graduated in 1984 my wife Kris and I had a newborn son and I really needed a job.

BW: How did you meet Kris?

In a nursing home! During the summers I was a maintenance man in a nursing home in Mequon. She was a nurse there. It was a reverse Cinderella story - the maintenance guy falling for the nurse. She was impressed by my floor waxing and buffing skills, I guess!

BW: You worked with M&A for nine years before making the switch to First Business Bank - how did that happen?

After working in commercial lending for six years in Milwaukee, I was transferred to Madison. It took me six years to establish my credibility and more high enough up the ladder to get the transfer. When I came to Madison in 1990, First Business Bank was just getting started. I was very interested because my experience was in commercial banking. I thought the idea of a locally managed bank dedicated to commercial banking made a lot of sense.

A few years later a friend of mine invited me to go fishing on Lake Wisconsin. The lilacs were blooming, which meant the crappies were biting. We ran into another friend of his - Jerry Smith (the founder of First Business Bank) - who wasn't supposed to be there, be he noticed the lilacs were blooming, too! Jerry invited us to fish off his dock. He was in jeans and a Wisconsin sweatshirt. I thought, "Wow, this guy's a bank president and he's wearing jeans!" My current employer was very formal - that's all I had known in my banking career. In fact, the bank I worked at had a policy that when you walked through the lobby you had to wear your suit coat.

Anyway, I got to know Jerry. Soon after that, there were six banks competing for the business of this top company in town. It came down to Jerry and me, and I won the business. I ran into Jerry at a conference a little later and he leaned over to be and said jokingly, "You can't go fishing at my place anymore."

Another opportunity arose in 1993 where again it came down to myself and First Business Bank, and I won the business. Then Jerry said, "I think we need to talk." He wanted to hire me. It was a great opportunity for me to make a bigger impact with a smaller bank. So I took the job.

BW: How is First Business doing?

Very well. What started out as a bank has now expanded. Our holding company, First Business Financial Services, now includes two banks, First Business Bank - Madison and First Business Bank - Milwaukee (individually chartered banks, not branches); a trust and investment company, First Business Trust & Investments; an equipment leasing company, First Business Leasing, LLC; and an asset-based lending company, First Business Capital Corp. This breadth of services is very unique for a company our size.

Our Madison bank has significant market share, especially among small and medium-size firms. Over 16 years we have grown our assets to $550 million. Only a few of our 1300 business clients are startups, so that means more than 1200 have switched to First Business Bank from somewhere else.

Because we only do business banking, we are very focused. We don't have to worry about kid's clubs and drive-up tellers, for example. And a traditional bank our size would have 30,000 or more accounts. Because of this, we can provide a higher level of attention and personal service. I spend all my time with business clients. Since we are headquartered in Madison, all the decision-makers are here. It is very easy to assemble a loan committee at the drop of a hat - we can turn around decisions very quickly.

Our model is also different. As I mentioned, we really pay up on client deposits, so combining that with very competitive loan rates, we have a skinny net interest margin. Most banks are at about 4% and we're at about 3%. This works for us, however, our operating expenses are about 1% less than a traditional bank, so we get to the same bottom line, but our clients benefit from the better loan, and especially, deposit rates.

We also worked with the UW School of Business to put together the first annual Dane County Economic Survey. Our clients were telling us there was no local economic data they could rely on for budgeting and planning. Our presentation of the report was very well received with more than 100 business leaders attending. And we've continued to offer this service to the business community every year since. First Business also presents eight seminars a year for our clients that deal with key business issues.

Finally, the skills, quality, and integrity of our staff is unparalleled. Our culture is very team-oriented. People enjoy working here - it's almost like a club. We are very particular about who we hire. We want to continue to feel small and be unique, even as we grow. We have a healthy fear of losing our culture as our success drives our growth.

BW: Why did First Business go public?

The trigger was going over 500 shareholders - when that happens you must register as a public company. There are ways to reduce the number of shareholders, such as buying back shares, but we didn't want to do that. Many of our shareholders are clients and employees--we're friends and they wouldn't want to be bought out, and we wouldn't want to buy them out.

A company also has to be registered with the SEC to be listed on the stock exchange. We wanted to be listed so we could have access to equity capital, which will help with our future growth plans. Before, when we needed equity capital, we went out and sold shares. We did it ourselves, but it's not one of our core competencies. Both Jerry and I are sales-oriented and client-oriented. We are good at bringing in new clients and retaining our existing clients, which results in growth.

BW: Right now you are president and COO of First Business Financial Services and CEO of First Business Bank. Jerry Smith will be stepping down as CEO of First Business Financial Services toward the end of the year and you will be taking over that role as well. Sounds like you're going to be busy.

I currently have our operating entity presidents reporting to me, as well as heads of human resources, finance, and marketing. As CEO, I will need to have our corporate secretary and the internal audit function reporting to me, as well as increased corporate strategy execution responsibilities.

BW: What is your typical day like?

I'm up at 5:45, at the office by 7:00 a.m, and leave work at 6:00 in the evening. Usually I will bring some reading home with me. I also work out most days--somehow I manage to get it in. Working out is a great stress reliever. In fact, I get a lot of good ideas when I run, bike, or swim, so it is a very productive time, as well as therapeutic.

BW: What are your some of your immediate challenges?

The biggest challenge is keeping up with all the opportunities--this is an exciting time. I will also have more responsibility toward the end of the year when I move into the CEO position.

BW: What is your best piece of business advice?

Try to help make your boss successful and don't worry about yourself. And if you are a supervisor or manager, make sure the people who work for you are as successful as they can be. This means being team-oriented.

Bio

Who: Corey Chambas

Education: UW-Madison, Business

Family: Wife Kris, son Matt, daughter Ally

Favorite local restaurant: Restaurant Muramoto

Favorite movie: Snatch

Hobbies/activities: Musky fishing, triathlon training

Most recent book: Angels and Demons by Dan Brown

Most important career experience: Going fishing for crappies

Best-kept secret in Madison: UW Arboretum

Favorite Wisconsin getaway: North Woods

Most admired person: My mom

Scanners will save time? Check

Thu, 16 Feb 2006 06:00:00 GMT

Local banks eager to unveil new technology

As computer technology has steadily eroded the effort needed for office clerical tasks, Joe Gastel figured the old-fashioned paper-checking system was taking up too much time.

As controller for the Madison insurance agency Mortenson, Matzelle and Meldrum, Gastel estimates employees spent from three to five hours a week doing nothing more than sending checks to First Business Bank, filing them, and preparing them for couriers.

But not anymore.

The agency is one of the bank's three early clients using its new remote deposit system. The system scans images of paper checks and delivers them via the Internet to the bank, without the time or travel.

"It's freed up our people to focus on better things than clerical work," Gastel said. "We can focus on our operation and other ways we can save money in our processes."

Banks throughout the Madison area are scurrying to get the technology up and running, and some, such as First Business and Rockford, Ill.-based Amcore Bank, are already accepting the images from business clients.

Many others are close to unveiling the product, including the State Bank of Cross Plains, which said Wednesday its product will be available within the month.

The "Check 21" law that went into effect in 2004 paved the way by making electronic duplicates of checks legal documents. Sensing the huge business upside for such a tool, banks have aggressively pursued development of the technology.

The efficiency of eliminating paper copies is clear throughout the industry, but for smaller banks like First Business, the benefits are particularly attractive: It can dramatically expand the base of potential deposit customers, said president Michael Losenegger.

"Clearly the clients benefit, but the bank benefits because we now can have deposit accounts where we might not have had them before," Losenegger said Monday.

First Business will demonstrate the technology - which consists of a small scanner connected to a computer - today at 2:30 and 4 p.m. at its offices in University Research Park at 401 Charmany Drive.

Local banks with only a single location see the technology as a way to compete better with much larger, geographically extended competitors.

"We keep pushing the envelope of what we consider our markets," said Brad Schroeder, first vice president of the DMB Community Bank in DeForest, who said borrowers will one day benefit from his bank being able to accept deposits from farther away.

Betty Noon, vice president of the State Bank of Cross Plains, said there is an urgency in offering remote deposits, as some of her bank's customers have been wooed by larger banks that have the technology.

Consumer advocates have raised concerns about remote deposits, arguing the technology will eliminate the "float" that shoestring budgeters rely on. That is, writing a bad check, waiting several days for it to be processed, and depositing money in the meantime to cover it.

But local bankers say that day is still several years away. Only when the technology becomes universal will check be processed instantaneously, said Todd Conkey, a vice president for Amcore, which unveiled the technology in January.

In the meantime, customers are beginning to understand that the float - never a financially responsible practice in the first place - will soon become a thing of the past, experts say.

Paying Employees Cash for New Hires

Thu, 1 Sep 2005 05:00:00 GMT

Ever wonder how you can recruit valuable new employees without spending a large portion of your marketing dollars?

If you haven't turned to your own employees for referrals, you may be missing the boat. Here's a look at three area companies that find employee referral programs to be a valuable recruitment tool.

Building the Program

Jodi Chandler, vice president of HR with First Business Financial Services, Inc., says the company's employee referral program has been in existence for about 10 years. "It started out at a $100 referral fee and now is at $250," says says. Ninety days after an employee's referral is hired, the employee who made the referral receives $250. The offer is good across the entire company, so it doesn't matter what subsidiary the new employee is hired for," Chandler explains.

At Conney Safety Products, LLC, Marcy Mahone, HR manager, notes all employees are eligible for the employee referral program, which as been part of the company for over five years. "After a person is hired, the referring employee receives $350 once that person completes their 90th day at Conney," she says.

Mahone notes referred employees go through the same process as other candidates. Interviews do not guarantee that the referred candidate will be hired. "They still must meet the qualifications and expectations that we have in place," she says.

Between June 2004 and June 2005 Conney hired six people through employee referrals. Five are still employed by the company.

At National Guardian Life Insurance Co., Kathy A. Johnson, director of HR, indicates the company's talent scout program awards cash bonuses if full-time candidates are referred by an active employee. "This bonus is on the active payroll when payment is due," Johnson says.

For nonexempt positions, the bonus pays $150 immediately upon hiring. An additional $150 referral bonus is paid when the employee completes six months of satisfactory service. On exempt (salaried) positions, a bonus of $250 is paid immediately upon hiring, with an additional $250 after the employee completes six months of satisfactory employment.

Any downside to paying referring employees? "No downside," says Mahone. "But we did have to find a way to identify referrals before someone is hired. The application works well for this - otherwise we don't recognize unless they're identified up front."

Recruitment Results

At First Business Financial Services, employees like the fact that they are offered a reward for recruiting others, but there's more to it than that. "People like working here," Chandler says. "They feel good about recruiting people to an environment that they enjoy."

The bank has a rigorous hiring practice. Still, employee recruitment results are strong. In 2003, 45% of new hires were referred by employees. Last year, 40% of new hires came from employees. "This year, at the end of July, we were a t 35%," Chandler says.

Promotion Helps

Conney pays its employees for their help in a very visual way. "In order to make a big impact, about two years ago we began paying the referral in cash. We actually walk up to employees in front of their coworkers and give them $350 in cash," says Mahone. "We think that makes a bigger impact than just adding money to their paycheck."

Keeping Your Business Credit Strong

Sun, 1 May 2005 05:00:00 GMT

One of the most challenging parts of running a business (especially in an uncertain economy) is maintaining the sometimes delicate balance between cash flow and debt - making enough to expand the business and also pay down (or pay off) company debt. Having good business credit is critical for getting the money you need to weather the storms that always seem to be on the horizon.

On the surface it seems simple enough. "For businesses to maintain their ability to borrow, they must keep payments current, not overextend, and keep up a good cash flow," says Eric Johnson, vice president with Johnson Bank. "For maintaining a good balance sheet, it's important to be well capitalized and not overleveraged."

That means having sound financial management processes in place. "It's imperative that the business owner understands how to use financial statements and projections to help manage the firm's credit needs," says Neil Lerner, director of UW's Small Business Development Center. "Monthly or quarterly cash flow history and projects are useful for understanding which months of the year additional cash is needed."

Credit problems often start when companies don't take their business plans seriously enough. "A surprising number of business people don't fully understand their business plan, analyze the market, or set goals," says Connie Kilmark, a financial counselor and owner of Kilmark and Associated, LLC. "Or they have someone else write the plan, and then they take it to the lender, only to disconnect with the plan once they've received their loan. The lender views the business plan as a serious committment - if the goals aren't being met, that undercuts the owner's credibility tremendously."

Kilmark also points out that some owners who work 24/7 feel that their hard work alone excuses them from making prompt payments. "They almost feel that vendors and creditors are being unfair if they expect payment on time," says Kilmark. "One of the worst things a business can do is share the risk of its ups and downs with its vendors and creditors, because that portrays the business as high risk."

Communicate with Your Lender

"Submitting financial information on a timely basis is very important," says Michael Losenegger, president of First Business Bank. "If the banker is just receiving December statements in May, that's not a good sign. Bankers don't like negative surprises."

Johnson advises having one or two key contact people at the bank who know you well, and understand your company's needs. "If it's just numbers, it's not a relationship and that's all you'll have if hard times strike," says Johnson. "But if you have a real relationship with a person, and your business has a bad month, or cash flow problems arise because receivables spiked, it can be worked out. You just need open lines of communication."

Banks know that it's much easier to retain current clients than it is to find new ones. "If lenders still believe the management team and business plan are sound," says Losenegger, "they'll work with the client to come up with a solution. They might revisit the business model to see if something has changed in the market. The solution might be granting additional credit for more financing. If it's a temporary cash flow problem, they might stretch the amortization schedule from five to seven or ten years. Or for a certain length of time the owner may only have to pay interest, instead of interest and principal."

Another Pitfall

Early-stage businesses sometimes fall into the trap of using credit card debt in lieu of bank credit. Credit cards should be used as a convenience for business expenses that can be paid off every month. "The problem with using credit cards for longer-term expenses is that the interest rates are expensive and it's what I call 'undisciplined money,'" says Lerner. "Typically the user has no plan or timeline for paying off this credit card debt and interest charges can be 18% or higher, which is more than twice that for bank financing."

Communication is critical in every credit/debit relationship. "If there is a large downturn, or a client leaves, communicate that immediately to your lender," says Kilmark. "Deliver any bad news as early as possible - that timing could be important to your lender, too. Telling your banker up front shows a concern on your part. Don't delay until your lender has to deal with your problem in crisis mode."

E-Banking Saves Time and Money

Tue, 1 Feb 2005 06:00:00 GMT

E-banking is being used by more businesses as banks continue to provide a greater range of e-technologies, and market them more aggressively to the business community.

Kenneth D. Thompson president and CEO of Capitol Bank, says roughly 20 to 25 percent of his customers use online banking. "Almost all new customers ask about online banking right away," he says.

"In the 2004 survey by the Independent Community Bankers of American and inFinet Resources, 77% of responding banks offered electronic bill payment, 62% provided electronic updating of account information, and 51% offered check imaging," says Karen Virnoche, ibank manager for Oak Bank. Other services banks provide electronically include applying for loans and credit cards, opening deposit accounts, online brokerage, and aggregating financial information from other Internet sites.

"E-banking allows for payroll processing and transferring funds within the bank, as well as externally to and from other financial institutions," says Theresa Wiese, senior vice president of First Business Financial Services Inc. "This service is also used for consolidating funds, accounts payable processing, loan payments and advances, accounts reconciliation, electronic processing of tax payments, and positive pay."

Positive pay can also be used with ACH payments (automated clearing house), which are commonly used for direct deposit of payroll. "Setting up an ACH transaction to recur is efficient and ensures the timeliness of payment or collection," says Laura J. Peterson, business banking officer at Monona State Bank.

Two of the most popular services are payroll cards and check imaging. Payroll cards allow employees without bank accounts to be paid via direct deposit, which improves personal security for those without bank accounts because they don't have to carry large amounts of cash.

Check imaging allows canceled check images to be stored in a fraction of the space that an actual check would occupy. "These images can be accessed via personal computer and the Internet," says Sandy Bruhn, vice president of cash management for Johnson Bank. "In the future, images will be able to be taken at the business location and sent as a file to the bank, which will eliminate location as a factor in choosing a business bank."

Making Banking Easy

The convenience of performing various banking transactions online saves energy, money, and physical space. "For example," says Peterson, "the QuickBooks download saves the user time reconciling their account and compiling financial reports. The bill payment feature enables the user to pay bills and invoices electronically, eliminating the need to address envelopes and purchase stamps."

E-banking does not require special software either. Businesses can bank online from personal computers by logging on to a secure website with a username and password. Businesses can also arrange the password capability for multiple users.

Such customization is key when choosing an e-banker. "A good e-banking service can be customized for the specific needs of your business," says Peterson. "You can use an e-banking package that offers only the features that best meet the cash management needs of your business. A good business banker should offer resources that will help you become comfortable with your e-banking service and features, as well as provide an e-banking customer support line for your convenience."

Security

Security challenges are ever-present on the Internet. Virnoche urges businesses to be aware of phishing, "an online form of identity theft that uses spoofed e-mailed designed to lure recipients to fraudulent sites that attempt to trick them into divulging personal financial data."

Virnoche says the best defense is to "react with caution" to suspicious e-mail offers. "Bypass links in any e-mail, no matter how official it looks," she says. "Instead, open the banking website directly, as you would do if unprompted by an e-mail."

In contrast, the security benefits of e-banking also prevent internal employee fraud. "Positive pay allows matching of check numbers and amounts to prevent fraudulent items and altered amounts," says Bruhn. "And new imaging technology will make it possible to also match the payee, giving added protection."

Taking the Mystery out of Commercial Loan Underwriting

Mon, 1 Nov 2004 06:00:00 GMT

If you're looking for a new commercial loan, first recognize that commercial lending is different than consumer lending. In commercial lending, there are no hard rules or ratios that make a loan either acceptable or unacceptable.

Commercial lending is a bit more art than science. However, the underwriting process is not the mystery it may seem to be. It is simply a process of information gathering (or due diligence), financial analysis, and the making of informed judgments.

Repayment Sources

Repayment sources are usually from cash flow, collateral, and guarantors. The bank starts its analysis process by getting to know and understand the prospective borrower by meeting with company management. General information is gathered about ownership, management, products and markets, financial, and promotional information.

Collected Information

Lenders typically collect year-end balance sheets and income statements for the past three years, the most recent interim financials, corresponding interim statements from the prior year, the annual budget, business tax returns (if year-end statements are unaudited), accounts receivable aging, and possibly accounts payable aging.

If your business is privately held, the owner(s) usually guarantee the debt, so current personal financial statements and personal tax returns are also collected. At least one meeting is held at the business location so a tour of the facilities can be conducted.

Written Analysis

If the lender determines that the above information is favorable, a written analysis is done by the loan officer using the information gathered. It will be reviewed by the loan committee or used to document the lender's individual loan approval.

The analysis includes a history of the business, management, products and markets, loan purpose, financial analysis of the business, collateral analysis, and financial analysis of any guarantors. The goal is to reasonably assess the likelihood of the company's continuing success.

Differentiation Factor

Lenders need to understand how the company positions itself in the marketplace and differentiates itself from its competitors. Is the company positioned as a low cost provider or do they provide higher quality, better services, or faster turnaround? Who are the major competitors? Are there barriers for new competitors? Is there a major concentration risk? How are sales generated? Are revenues cyclical with the general economy or are they seasonal?

Purpose of Loan

The purpose of the loan determines the appropriate credit structure. For example, working capital needs caused by growth should be funded by a line of credit with interest-only payments required, while an amortized term loan better matches the life of longer-term assets such as equipment or real estate.

Financial Statements

Banks look for trends and significant changes while using financial ratios for analysis. Major items examined include liquidity, the ability to meet current obligations, using the current ratio (current assets divided by current liabilities) or working capital (current assets minus current liabilities); and leverage, the company's net worth position relative to its liabilities, using a debt-to-worth ratio (total liabilities divided by net worth). An acceptable current ratio or debt-to-worth ration depends on the industry and the life cycle of the company.

Income Statement

Typically, lenders analyze items beyond just sales and net-income growth or compression. For example, gross profit margins and operating expense levels are compared to industry averages and examined for trends. Changes need to be explained relative to business strategies.

Sources of Repayment

Cash flow is the primary source of debt repayment and vitally important in most loan situations. Cash flow is different from earnings, in that noncash items such as depreciation from the income statement, balance sheet changes such as growing receivables and inventory levels, and other debt payments need to be factored in.

The analysis calculates cash flow using both the income statement results and balance sheet changes. The lender analyzes historical, current, and projected ability to service the debt, as well as capital expenditure requirements, which need to be financed either through borrowing or using available cash.

Collateral analysis is a basic part of any loan analysis in that it provides a secondary source of repayment should the expected future cash flow not come to fruition. The bank applies a discount factor to the value of assets that serve as collateral for the loan to determine a probable liquidation value.

The "science" is the process outlined above - the "art"of the deal is the approval or denial of the loan. Rarely is it a clear-cut situation.

Want to Find Out What Employees Really Think? Third- Party Surveys Are the Way to Go

Thu, 1 Jul 2004 05:00:00 GMT

Want to know what "hot buttons" employees are talking about over lunch? Or why you're not attracting the caliber of employees you want and expect? Then consider conducting employee surveys to better grow your operation.

First Business Bank has been conducting employee surveys since the bank opened 14 years ago. The survey costs about $3,500, which includes all summary reports with comparative data.

"In the beginning, the employee survey was conducted every other year," reports Jodi Chandler, vice president of HR of First Business Financial Services. "However, as the number of employees and entities within the First Business family have grown, we have conducted the survey on an annual basis for the past three years."

Chandler says the participation rate is extremely high. "The expectation to participate was first communicated in 1990, when the bank opened," Chandler continues. "Our culture centers around open and honest communication and this survey is one of the tools that helps support that."

Survey responses are collected anonymously and confidentially. Employees now can complete the survey on-line. "We block off 30 minutes of company time and ask everyone to complete the survey at the same time," notes Chandler. "I believe we get such high participation because of the pre-scheduled time to complete the survey."

In keeping with a culture of open communication, the results are shared with employees. "We present the results to all of our employees at an employee meeting." Says Chandler. "The results show how we compare to our own prior years' results as well as how we compare to our peer group."

Additionally, management discusses the survey results during the annual fall planning session. "Goals and strategies are put into place for various managers to correct any areas where we feel we are deficient, as well as maintain the high level of satisfaction we have in many areas," Chandler says.

Value and Benefits

"We have the ability to compare our responses to the industry rankings to see where we have room for improvement, and also to see where we are doing things well," indicates Joan Burke, president of First Business Trust & Investment Services.

"Our surveys give us information at the company, division, and department levels, if desired. This can be helpful in evaluating division and department leadership, strengths, and shortfalls."

Benefits gained from using outside firms for surveys are higher participation rates, comparative data, identifying employee and employer trends, understanding employee desires for changes in employee benefits and 'quality of work life' issues, assessing morale, and gauging how change is affecting the organization.

Internal Surveys

Suby Von Hayden & Associates gets employee feedback on a variety of issues including social events, wellness programs, and employee benefits. The company, with about 375 employees in five locations, periodically conducts on-line surveys. "Surveys help us define what our employees want and need," says HR director Sherry Gustafson.

Every two years employees are sent a survey pertaining to benefits. "we want to know if we're wasting our time offering certain benefits, or are there other benefits employees are more interested in?" says Gustafson. About 50% of all employees respond. The marketing department sends out the survey and tabulates the results, which are sometimes shared with employees.

Hiring Surveys

Creative Financial Staffing (CFS), a company affiliate of Virchow Krause & Co. LLP, finds temporary and permanent employees for clients. CFS does a follow-up with clients and employees (those who have been subsequently hired full-time) through its "Creative Financial Staffing Motivation and Retention Survey."

In a recent survey, 14,000 letters and e-mailed surveys were sent out, with a response rate of about 14%. Mailing costs were $3000. Some questions included: Did you hire a person who was previously a temporary employee? If so, why? What's the more important thing you're looking for in a staff member? For employees, a key question was "What are the most important factors in accepting a job?"

"For the last two years, the most important job factor has been meaningful and interesting work," says marketing coordinator Kathy Black. "The second-ranked factor was salary and benefits. Probably the most important thing about surveys, from an internal perspective, is that they keep employers aware of what the hot buttons are, what people are looking for. Knowing this is critical for maintaining a competitive edge in the market."

Loaning Money to Employees: Is It a Good Employee Benefit?

Mon, 1 Mar 2004 06:00:00 GMT

Do your employees reap the benefits of a loan program? Some companies find that offering low or no-interest loans is a surefire way to reward people and create a buzz.

Joan Gillman, director of special industry for the UW-Madison School of Business and executive director of the U.S. Association for Small Business Entrepreneurship, advises to "be careful loaning money to employees - the situation is not dissimilar to lending money to family members."

As an employer, you may have access to employees' credit reports. There's something else to consider, too. "If you saw the TV show The Restaurant last year," says Gillman, "you saw how jealous and angry employees become when they learned the owner lured back an employee who quit by offering her a new bike." Moral of the story: If you're going to lend money to one employee, you have to be willing to lend money to all employees. "You have to be able to prove that your loans are unbiased and fair," Gillman stresses.

Loans for Computers

First Business Bank sees making loans to employees (for new computer purchases) as an added benefit. "It's another way to attract and retain good employees," points out senior vice president Michael Losenegger.

The successful loan program for home computers has been in place for eight years. "The program gives employees greater flexibility," says Losenegger. "employees who are more flexible are generally happier." Bank employees like the idea because they can access business files, check their e-mail, and do other work as need be from home.

Penny Byrne, vice president and manager of the bank's loan processing department, adds that "the loan program enabled me to purchase a new computer with no money down and a zero percent loan. Having a computer at home gives me flexibility in my work schedule."

It also helps her stay in the look when unexpected situations arise. "If my children are sick, I can stay home with them but still connect to the bank and get work done," says Byrne. "Many employees have benefited from this program over the years."

First Business Bank makes loans up to $5,000 at zero percent interest to employees who have been with the company for a year. The money must be used to buy computers for home use. Employees repay the loan over a three-year period. "We finance 100% of the purchase price of the new computer system," Losenegger says. (Employees who are with the bank less than a year pay 10% of the purchase price.)

From the Legal Perspective

Drew Cochrane, attorney with Stafford Rosenbaum LLP, believes that, while employer loans can be a good way to recruit and retain employees, employers should fully understand the ramifications of loan agreements. "Loaning money may be considered discriminatory, depending on how the requirements are structured," Cochrane explains. "The program may or may not be 'color blind' and should be looked at to make sure it's not potentially discriminatory."

Tax implications are another possible concern. For example, if five years after the loan origination the employer forgives the principal of the loan, the loan would be considered taxable income by the IRS for both the employer and employee. "And if you don't pay taxes on it, you may be assessed fines and penalties," says Cochrane.

The practice of employer loans raises other questions. "What if you've been employed for four years and 11 months - would you still be eligible for the five-year waiver of principal?" asks Cochrane. "The Employee Retirement Income Security Act (which states that you can't fire employees close to a retirement date to avoid paying anticipated benefits) probably applies here," Cochrane notes.

Other questions: Would loan programs draw people just because of low-interest loans? How will employees pay their employers back? "In Wisconsin," says Cochrane, "if you deduct the loan payments from their paychecks you must have written permission to do so."

For most employers, offering loans to employees is uncharted territory. How should employers proceed?

Cochrane advises to have an attorney draft the agreement so you comply with state and federal regulations. "Employers want their investment to create a buzz and reward eligible employees, but the program has to be set up carefully so the experience is a win-win situation," concludes Cochrane.

Behind the Scenes of Internet Banking

Thu, 1 Jan 2004 06:00:00 GMT

Not long ago bank customers could only dream of keeping track of loan and checking accounts on-line or making on-line bill payments, stop payments, and wire transfers. Today, customers have the availability of banking anywhere, anytime.

Multiple Functions

Customers at First Business Bank will soon have access to Internet check imaging, allowing customers to see the front and back of cleared checks.

"Another valuable service," says Michael Losenegger, senior vice president, "is repetitive wire service. Once it's set up you can make multiple transfers of funds to the same party very quickly and easily."

Losenegger says e-banking makes the check reconciliation process easier. Customers can export information from the Internet and load it to a spreadsheet.

E-banking provides more immediate access to information which helps deflect check fraud. Customers can access their accounts anytime, wherever they are. And a variety of security levels can be set up within a company. "Through passwords and log-in information we can set up the sustem so employees have different levels of access," Losenegger says.

How has e-banking changed the way banks and customers do business today? "Customers have faster and more efficient ways to manage their money," Losenegger says. "It increases productivity-they don't have to call us to inquire about information like what checks have cleared. They can easily find out with a click of a button."

Sophisticated Packages

Ken Thompson, president of Capitol Bank, indicates the bank offers free e-banking for personal customers and two levels for businesses. The basic e-banking level is $15 a month while the premium package, based on usage, runs $25 a month.

What's the return of investment from the bank's perspective? "It's a loss leader for us," Thompson says. "But we recognize that instant on-line access makes it easier for the customer with less impact to the bank." He estimates about 25% of the bank's total customer base uses e-banking.

Capitol Bank promotes e-banking benefits both internally and externally. "Those who use it love it, plus we want our investment utilized," explains Ann Hlavin, the bank's assistant vice president.

Customer Persuasion

Kim Preston, assistant vice president of cash management with First Business Bank, indicates that customers tell her that Internet banking saves them a lot of time. While the bank recognizes that some customers use Internet banking, those who are 'on the fence' need to be persuaded. "It's why we offer three months of free Internet banking - we want customers to discover the benefits firsthand," Preston says.

Judy Olson of the Bank of Verona agrees with the "try it, you'll like it" concept. "There's an education curve involved with Internet banking. But once customers try it, they use it all the time."