HOW WE HELP FINANCIAL INSTITUTIONS

THINGS WE HAVE HEARD FROM COMMERCIAL LOAN OFFICERS:

These are paraphrases of lengthy conversations but they are each directly from specific conversations we have had with loan officers

We have heard: I value every client, but my production goals require that I focus on large deals:

It takes about the same amount of time to do a $50K loan or a $500K. The more small deals I do the less time I have for large deals; which reduces my chances of getting a bonus, and the more scrutiny I get about being productive with my time.

Use Pebble Plan to make sure your small deals are ready to go so you don't spend more time than necessary:

Small business applicants that go through Pebble Plan have their assumptions and expectations challenged while the are creating their plan so they have the opportunity to figure out if they are really ready for lending before you have to spend any time on them. We scrutinize their operations and their financials and help set correct expectations for the lending process before they finish their business plan, so when they come in for a meeting they know what they are doing and are ready to go forward. Just send us your small deals and tell them to send you a copy of their finished plan when they are done.

We have heard: Any step in the process could kill the deal, so we work with whoever is ready for the next step:

We talk to as many people, and take as many applications as possible because we cant know who is going to have issues with their documents or plans, or collateral, or something else, and who is going to be ready to go. When we get someone who has their stuff together we try to get things done as quickly as possible so everything is current and we don't have to request new docs. Its amazing how easily a delay to get new docs can kill the whole deal.

We have specifically designed Pebble Plan to speed up the process never be the source of a delay: After talking with dozens of lenders we have controlled for the things we can and have created a borrower preparation process that addresses some of the most common causes of delays to the lending process. 1. The business plan creation process is about a month faster than creating a traditional business plan. 2. The plan evaluation process is 5x or more faster because we don't make you search for answers and our unique formatting makes it easier to start & stop evaluating without loosing your place. 3. The education portions of the app give borrowers a better understanding their financials and the lending process; this additional upfront knowledge is likely to save you one or more meetings, which depending on meeting frequency, could save you another couple weeks. 4. Our auto-adjusting financial time-line means that financials are never more than 30 days old and clients only need to update the results of the current month and re-print to stay up to date while the system automatically adjusts all the calculations.

We have heard: Sometimes you know a small business is in trouble but the owners won't ask for help:

The owners don't want the bank to know they are struggling, but if you let them continue to struggle you may be letting a correctable situation get worse. But if you have them come in and sit down to make sure they are OK it changes the relationship and they get awkward and defensive. You don't want to wait until they start missing payments, but knowing how and when to step in to make sure the loan stays in good standing can be a difficult judgement call to make.

Pebble recovery planning lets you help your borrowers at the first sign of trouble without making it awkward:

Recommending the Pebble recovery plan at the first signs that a business is in trouble tells a borrower three things: 1. The bank is paying attention 2. They are willing to get involved 3. They are trying to help. Now you can go about your work and keep an eye on their progress periodically, knowing that they have what they need to take reasonable steps on their own. Whether or not they take advantage of the resource and if they do / don't start to turn things around that lets you know a lot more about how you want to engage with them on your next contact. We provide both a pathway to encourage them in and a reporting mechanism to help them stay accountable. You decide how involved you need or want to be based on your relationship and how much oversight they need.

We have heard: There is both an art and a science to commercial lending:

The science part of lending is being able to do the financial analysis, fit the client into the right products for their needs based on their numbers and being able to present the deal to loan committee etc. in the right light to get it in the books. The art is evaluating the borrower as a person and appropriately weighing factors like their experience, expertise, drive, etc. that can increase or decrease the real risk beyond what the numbers say for a given market. The art of lending uses the numbers to get beyond what they numbers alone can tell you.

Pebble Plans give insight beyond the facts & figures so evaluators can see what other plans don't show: We ask certain questions at certain stages of our process to help uncover gaps in a users understanding; many of these are how and why questions that require thought and specific knowledge to answer completely. This serves three purposes 1. The user is confronted with it which tends to make them more receptive to help 2. It gives the users a specific use-case for the built in validation tools we provide 3. It gives plan evaluators an idea of where additional questioning could be helpful. FICO scores are helpful for certain things but they cant evaluate what a loan applicant does or doesn't know about their operating processes and how they will adjust to changing market scenarios.

THINGS WE HAVE HEARD FROM BANK & CU LEADERSHIP:

These are paraphrases of lengthy conversations but they are each directly from specific conversations we have had with bank leaders

We have heard: For CRA, we just keep doing what works until it doesn't, then we find a new thing that works:

We split our investments and hours between CDFIs, youth financial education, non-profit board service. Of course we agree with the goals of CRA but it feel like the cost of doing business in todays regulatory environment. We could probably make more impact other ways, but it might not get us credit, so we don't; we just stick with what works.

Pebble Plan gives banks three separate ways to get CRA credit and have a chance to get an LMI loan :

1. Our business modeling, business planning, and recovery planning processes are inherently educational and are well know to be lacking in LMI communities. If banks purchase access to Pebble Plan for their LMI clients or their families, they are providing entrepreneurial education via our built in curriculum. 2. Banks can purchase access to Pebble Plan for community non-profits and let them provide entrepreneurial education to their clients. 3. Loan officers can use the collaborative technology built into our app to mentor and coach LMI entrepreneurs in person or online without leaving the office. 4. If the bank uses Pebble Plan for it's LMI applicants the likelihood of getting a better prepared borrower goes up dramatically; and the bank may get a loan from it's existing LMI depositors.

We have heard: Variance = Risk. This is why banks like consistent processes that have been tested and work:

Even when a workflow is not the most efficient process in every situation, when applied across an entire bank it may be the most efficient workflow for the whole organization because it reduces variation in most situations, and with it the opportunity for large problems. The small inefficiencies built into bank processes that provide an extra layer of oversite are more than made up for by the problems avoided by the extra steps built into a process that reduces variation and risk.

Business plans and recovery plans are surprisingly still not consistent in many banks: Until Pebble Plan there has not been a consistent standard for business & recovery plans; but now that banks have the opportunity to add efficiency through our consistent formatting and content, more and more banks are experiencing this increased efficiency. When you consider how much information that effects a credit decision is contained in a business or recovery plan, it's surprising that there has been so much variability for so long. After bankers have seen a Pebble Plan and compared them to the best plans they have previously received, we consistently hear that they prefer our plans and will send their clients to use whenever possible.

We have heard: One of the most frustrating things about examinations is when things that have previously been evaluated one way, get evaluated differently because a regulator exercised her or his discretion in a new way:

Bank and CU examiners have tremendous authority and in some situations have a surprising amount of discretion regarding how they judge a banks performance in one area or another. It rarely helps to protest a decision once made, and doing so could negatively influence the examiners disposition for the remainder of the exam.

Recovery planning reports demonstrate that the bank took proactive steps to ensure loan quality: Regulators have commented that even though a borrower failed to meet their obligations, the presence of this report would reflect positively on the bank and would make them comfortable that the bank was doing what it could to monitor loan asset quality. Of course this is only one small element of an examination, but anything that can positively impact a regulators perspective may make it more likely that when they exercise their discretion, it is in your favor.

We have heard: There are courses of action we would prefer, but we can't tell clients how to run their business:

When we have opportunities to help a client be successful we want to provide the best insights possible, but the potential for a claim of lender liability limits what we can do or say. To play it safe we don't recommend any customer take a specific course of action, instead we may help set some context for the implications of the decisions they have to make, and direct them to resources we know of. As long as that direction would not entail the customer taking a certain course of action in their business we are ok.

Pebble Plan doesn't recommend courses of action, we help users design their own situational course of action: When clients use any of the planning resources we provide they must take the lead in setting the goals and making the decisions regarding the suitability of one approach or another. We provide educational content and validation tools that let users experiment with different variables (price, costs, staffing, sales efficiency, etc.) that can help them determine how effective a strategy may be, but they are always in the drivers seat regarding what gets included in their final plan and how they choose to explain its suitability for their purposes. When partners send us their clients they don't get our thoughts, they get their clients' thoughts in our format. This is distinctly different from a consulting service where a consultant may steer a client in a particular direction; we don't steer, we just provide the vehicle.

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