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Community banks are the lifeblood of their communities

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There has been much discussion and debate recently about the role of community banking in America.  In fact, I read with interest a recent article in the Wall Street Journal, “Tally of U.S. Banks Sinks to Record Low,” which compelled me to write this blog post reaffirming our support of these banks.

The article points out that the number of banks has dramatically decreased to 6,891 as of September 30, 2013. The reasons for this decline are varied.

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On one side there are changing demographics, and the challenges smaller, more rural communities face while simultaneously trying to prosper. Not to mention the impact of rapidly changing technology and accelerating costs.

On the other side, persistently low interest rates and a difficult regulatory environment have made the business of banking more challenging. Clearly interest rates will return to a more “normal” level at some point, and our hope is that regulators find proper balance as we move forward.

So, you may be wondering, what does this all mean for the banking industry? Opinions have varied greatly as to whether a reduction in the number of banks is a positive or negative trend. There also have been various viewpoints on the impact it could have for community banks, given the large number represented in the decline. This in particular is the point I would like to address.

UMB has been offering Correspondent Banking services since 1928, and we currently work with more than 1,000 community banks. Because of our relationships and experience in this area, we know firsthand the value they provide and the part they play in not only our industry, but in their communities as well.

We understand the critical banking and financial needs community banks address within their communities, and we are firm in our convictions that the community banking model works. Our company has always been an advocate for community banks that serve their local communities, businesses and citizens, often providing services larger banks are frequently unwilling to extend.

We know that banks are the lifeblood of their communities. As such, having community banks solidly positioned with the services required to fulfill their mission of growing and supporting their communities is crucial to the long-term economic health and vitality of their communities. It is also essential for the future of banking—and we will continue to be here to support community banks in their endeavors.


Mr. deSilva is president and chief operating officer of UMB Financial Corporation. He is also vice chairman of UMB Bank, n.a. Mr. deSilva joined UMB in January 2004. He is primarily responsible for UMB's fee-producing business units and product lines, including Scout Investments; UMB Fund Services, UMB Healthcare Services Payment Solutions, Prairie Capital Management. Additionally, he is responsible for all corporate operations, technology, properties, security and marketing.



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The Five Cs of Credit

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Are you an entrepreneur looking to start up a new boutique or local restaurant? Or are you an owner of an established firm seeking to expand or upgrade? Either way, securing financing for your business is sometimes an overwhelming process.

UMB has a long history of being prudent in our lending. We don’t want to put our customers, or ourselves, at risk, so we follow a sound underwriting process to ensure we are making the best decision for everyone involved.

Here are some common guidelines we use when it comes to the loan process.

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Character

This is the overall impression you make on the banker. Business experience and educational background will be evaluated, along with references and past experience.

Word of Advice: You need a business plan. Be open and honest – you should provide the most accurate and objective information about the business and industry landscape.

Capacity

You will need to detail exactly how you plan to repay the loan. Business cash flow, repayment timing and likelihood of repayment will be considered, as will payment history on your current credit. Financial partners need to have confidence that your business will generate enough cash to operate and sustain the company.

Word of Advice: Prepare to have money set aside for a down payment.  Don’t come to the table empty-handed.

Capital

This is the money you have individually invested in the business and is used to assess your risk should the venture not succeed. It’s important for you to demonstrate a personal financial commitment before seeking third-party funding.

Word of Advice: Financial institutions generally require that at least one-third to one-half of the business be funded with your money.

Collateral

This is where assets you own are pledged to the lender as a secondary source of repayment in case the loan is not repaid. You also may be required to sign a guarantee with the promise to repay the loan if you cannot repay it with the profits from the business.

Word of Advice: Most banks will expect the collateral assessment to be greater than the loan amount.

Conditions

This is the outlined plan for the loan, with details on how it will be used and for what purposes. Current economic and business conditions for all industries, as well as your business’ specific industry, will also be evaluated.

Word of Advice: Have a strong knowledge of industry trends, both nationally and in the local market. Timing can be critical.

You should pick a financial lender that will be your partner, not just your bank. After that, securing a loan to start or grow a business should be a smooth process and you’ll be well on your way to fulfilling your dream!




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Why Accept Credit Cards?

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Consumers are increasingly using credit and debit cards to buy everything from a pack of gum to a new car. Small business owners need to adapt to this trend and accept credit/debit transactions from their customers so they don’t miss out on potential revenue.

The numbers don’t lie. Take a look at this infographic to learn more.

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Why Accept Credit Cards Infographic


Mr. Brown serves as a product sales specialist, supporting sales channel strategy for the business segment in Consumer Banking. He joined UMB in 2010. Brown received a master's degree in business administration from Arizona State University in Tempe, Ariz. and a bachelor's degree in economics from Morehouse College in Atlanta, Ga.



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