So as I mentioned in my tweet on 2/3/09, I went to a really great event called "Succeeding as a Government Contractor in a Challenging Economy" hosted by Shulman Rogers Gandal Pordy & Ecker, PA. The presenters included Ira Hoffman and Jacob Ginsberg (both attorneys with the firm), Brad Wood (Sr. VP of Commercial Banking for The Columbia Bank), and James Scott, Jr. (a Principal with accounting firm Penan & Scott, PC). Usually I go to these events and have to "gently" correct the speakers because they misrepresent something about federal government contracting. But I have to tell you, I was impressed with the speakers and their presentations.
Ira presented first and covered information pertaining to the Stimulus Package. He gave examples of where the money was going and what areas contractors should consider targeting. He also discussed other topics relating to set-aside designations and the GAO ruling on the "rule of two." One interesting thing he pointed out you should note is per a GAO ruling, HUBZones get preferential treatment to SDVOs (if you don't know what these are then you probably aren't one). There is such a push for SDVOSBs that people forget this is the case. There were SDVOs in the room so I’m sure this caught their attention.
Brad spoke next and provided good insight to the participants on the banking relationship and its nuances. I think most companies discount the importance of a well established banking relationship. They know they need a good one, but don’t know how to develop it. Or in most cases, they only contact the bank when they need something (like a loan) instead of cultivating a partnership than grows more solid over time. I can speak to the benefits of this because we have a great relationship with our bank. Anyway, we all know that we should choose a bank that offers us the services we need.
What Brad emphasized was the need to find a bank that is suited to our business. For instance, the business owner should ask the bank what level of expertise is in the bank and what they understand about your particular industry. For instance, my commercial business is very cyclical and we had to teach our banker about our business and the industry so he could discuss specifics when he presented our loan package. You should ask who you will be working with on a daily basis and very important – ask about the bank’s processes for reviewing loans. Brad also stressed the importance of documentation and your financials. You need to make sure everything is kept up-to-date and is readily available to the bank upon request. As an aside, my personal suggestion is to scan documents such as your corporate documents (Articles of Incorporation, By-laws, etc); your company taxes and owner’s personal taxes for at least the previous three years; government certifications; annual reports (P&L and balance sheet); and any other relevant papers so you can email them over quickly. Bottom line is you have to show that you are a good credit risk and the bank should give you the resources you need to grow.
Jim’s presentation tied in nicely to Brad’s since both firms deal with the financial side of companies. Jim was on point when he said that cash flow and profitability are key, and they are. He talked how the company needs to understand the numbers, particularly since there is legal language in loan documents that pertain to the company’s financials. He also stressed the need for the company to implement a good accounting system that can support government contracts, and institute good internal controls (thank you Jim – we say this to people all the time!). He also stressed that companies need to make sure they are working with a qualified accountant and not Uncle Joe who thinks he can be the company accountant since took math in high school back in 1939 (OK I embellished what he said, but you get the point). Anyway, I’m sure there were people in attendance related previously on a subconscious level, but left with a different appreciation of the situation and its importance. I would not be surprised if several accountants got calls yesterday afternoon.
Jacob spoke last. His job is related to the loans the bank makes. He provided a checklist to participants so we could see what documents are needed related to the loan package. He suggested that companies get a legal review of all loan documents. I would bet you that there were companies in there who have gotten loans without counsel reviewing the specifics, but it makes sense that they would just sign the papers. Why? Because most companies believe they will pay the loan on-time and none of the provisions would be invoked. Well this ties in with Jim’s points. The loan documents contain provisions that relate to the companies ratios (debt to equity, etc.). If you don’t know the benchmarks and aren’t staying up-to-date on your financials you could get the loan called in even if you’re paying on time. Not a good situation.
Like I said, this was a great event that provided helpful information to a pack room of attendees. I’m looking forward to the next event they host!