Monday, August 22, 2011

Choosing an Attorney: A Matter of Timing?

How many lawyers does it take to change a lightbulb?  None.  They’d rather keep their clients in the dark.


The other day I was at my daily Extreme Boot Camp class in Claremont and quite frankly, my butt was getting kicked.  This is a good thing since I still have quite a bit of baby weight to tackle.  We had run and pushed up and sat up and jumped.  You know, all the things that a Boot Camp should require. 

I was yapping with another lady in the class and I said, “I am not not tired.” And she said something to the effect of “typical lawyer, just say that you are tired.  Always trying to make things complicated.”

Ah, sigh.  Most lawyers totally can handle a “lawyer joke” without needing therapy.  We knew when we went to law school that our profession was mocked.  I start off every single conversation with a prospective client knowing full well that they think I am trying to rip them off somehow. 

Now, this article is not going to try to bring down a rich history of lawyer jokes and general despise of attorneys to an end.  After all, some of the jokes are funny.  But, maybe, the problem is not the profession as a whole.  Maybe it is who clients choose and the timing of when the attorney is chosen that is the problem.

In terms of the choice of attorney, I can tell you one thing after talking to hundreds of people on the phone that are looking for an attorney.  Just in my own firm - some people respond better to me, some people respond better to my partner.  We have different personalities and ways of approaching situations. For example, he is more formal; I am more casual. 

So, why do people choose attorneys that they do not like?  Do you think that if the attorney is rude they will berate your opposition into disappearing?  Unlikely.  For the most part, you want things to settle quickly and that does not happen when a jerk is negotiating on your behalf.  Spend a little time.  Even if your issue is pressing, find someone that you like. 

You can bargain shop for the best deal, but remember that you get what you pay for. Look at where they went to law school and when the attorney graduated from law school.  This is public information – www.calbar.ca.gov.  (By the way, don’t even get me started on LegalZoom.  Long, painful sigh.)  Google them! 

Interview your attorney.  Call at least three people before you decide.  Ask lots of questions if you get a free consultation. We are ready for your questions.  Ask about flat fees, ask about billable rates, ask how quickly you will get your work product.  If you do not like the attorney from the start, the attorney will not grow on you when they bill you $300 an hour.  I promise.  Find someone who is a problem solver and not just an issue spotter.  Find someone who returns your call in 24 hours.

The other reason that I believe people hate attorneys is that people choose their attorneys (most of the time) when something has already gone awry and now they are angry that they have to throw money at a problem so that they can fix it.  Why not come to an attorney before the problem?  Why not show up when you are happy?  You will probably make a better choice if you are not angry that you have to be there.  Sometimes this is not an option, for example, car accident/personal injury cases.  But usually, you could have chosen when you did not have to choose.  For example, have a business attorney read a contract before you sign it to point out problematic clauses.  You may be happy you did in six months when you need to terminate or there is a dispute. 

Anyhow, after my Boot Camp class the other day, that lady came and apologized to me for giving me a hard time.  The apology was not necessary. I totally understand the preconception.   But, maybe all you clients out there should be looking now and getting while the getting is good.  What proactive steps are you taking?  Are you waiting?  Do you think you are savvy enough to do it yourself?  Maybe calling an attorney won’t be so bad. 

And so, in closing, how do you get a bunch of lawyers to smile for a photo?  “Say Fees.”
Sorry, couldn’t help myself.

Now, go and be productive and profitable.


Tina Loza is an attorney based in the Inland Empire.  Tina and her husband have their own legal practice specializing intellectual property law (patents, trademarks, copyrights, domain name disputes, etc.).  She also has three kids under the age of 3 and lives in Pomona, CA.  For more info, go to www.lozaip.com .


Friday, August 19, 2011

The 5 C's of Credit: What They Mean to Your Business

Businesses face any number of financial challenges. Often, it's as simple as needing financing to grow and stay competitive, expand business operations, purchase assets such as new equipment or a commercial building, or even consolidate and restructure business debts.
One of the most common questions among small business owners seeking financing: "What will the bank be looking for from me and my business?"


While each lending situation is unique, many lenders utilize some variation of evaluating the five Cs of credit when making credit decisions: 

 1. Character:

  • What is the character of the management of the company?
  • What is management's reputation in the industry and the community?

Investors want to put their money with those who have impeccable credentials and references. The way you treat your employees and customers, the way you take responsibility, your timeliness in fulfilling your obligations — these are all part of the character question.

This is really about “you” and your personal leadership. How you lead yourself and conduct both your business and personal life gives the lender a clue about how you are likely to handle leadership as a CEO. Your character immediately comes into play if there is a business crisis, for example.

As small business owners, you place your personal stamp on everything that affects your company. Often, banks do not even differentiate between “you” and “your businesses." This is one of the reasons why the credit scoring process evolved, with a large component being your personal credit history.

2. Capacity:


  • What is your company's borrowing history and track record of repayment?
  • How much debt can your company handle?
  • Will you be able to honor the obligation and repay the debt?

There are numerous financial benchmarks, such as debt and liquidity ratios, that lenders evaluate before advancing funds. You should become familiar with the expected pattern in your industry. Some industries can take a higher debt load; others may operate with less liquidity.

3. Capital:

  • How well capitalized is your company?
  • How much money have you invested in the business?
Lenders often want to see that you have a financial commitment and that you have put yourself at risk in the company. 

Both your company's financial statements and your personal credit are keys to the capital question.  If the company is operating with a negative net worth, for example, will you be prepared to add more of your own money? How far will your personal resources support both you and the business as it is growing?

If the company has not yet made profits, this may be offset by an excellent customer list and payment history. All of these issues intertwine, and you want to ensure that the lender perceives the business as solid.

4. Conditions:

  • What are the current economic conditions and how does your company fit in?
  • What are the trends for your industry, and how does your company fit within them?
  • Are there any economic or political “hot potatoes” that could negatively impact the growth of your business?
If your business is sensitive to economic downturns, for example, the bank wants a comfort level that you're managing productivity and expenses.
 

5. Collateral:

·         Primary Source of Repayment


·         Secondary Source of Repayment



Business cash flow will nearly always be the primary source of repayment of a loan. Lenders also look at what they call the secondary source of repayment such as business assets and the strength and financial support of guarantors.

Collateral represents assets that the company pledges as an alternate repayment source for the loan. Most collateral is in the form of hard assets, such as real estate, business assets or equipment. Alternatively, your accounts receivable and inventory can be pledged as collateral. The collateral issue is a bigger challenge for service businesses, as they have fewer hard assets to pledge.

Until your business is proven, you're nearly always going to pledge collateral. If it doesn't come from your business, the bank will look to your personal assets.

Keep in mind that when evaluating the 5 Cs of credit, lenders do not place equal weight to each area. Lenders are cautious, and one weak area could offset all the other strengths you show.

Debra Murphy is Vice President and Relationship Manager at Union Bank. She works with small to medium sized business in the Inland Empire and tailors financial products and services to help businesses grow, expand, and get to the next level.