Commercial lenders are in the business of making loans to businesses. In order to make loans, we review a great deal of data. Having worked in commercial lending at Arvest for 28 years, I have reviewed mountains of business data, business plans, financials, projections, proformas, market information, and more.
You can’t over-emphasize the importance of relevant data. We prescribe to various sources of industry information, both nationally and regionally. Also, being a bank with a long history of helping businesses in our market, we monitor trends for specific lines of business. This helps us be a valuable adviser for our commercial customers.
We are thus better prepared when a customer needs financial support. They may have a business idea that they believe will be successful and allow them to repay a loan, hire staff, and provide income for their family. Maybe they want to start a new business, expand an existing business, or build a new neighborhood, shopping center or commercial building.
So, they develop a business plan chock full of data about the need and market for their new idea, the start-up costs, the cashflow and the sustainability of their idea.
It is crucial that we vet the accuracy and thoroughness of that data. Building projections and proformas on inaccurate, outdated, or incomplete data can be disastrous for both the customer and the bank.
Have you done a comprehensive audit of your business’s data recently? If not, let me suggest you ask yourself some probative questions:
- Do I have enough data to make intelligent business decisions? In today’s digital world, more data is available from more sources than ever before. Think through the different decisions you regularly make and if additional data could help.
- Do I have the right data? With so much data available now, sometimes the most important thing is to not have more of it but to have the data that provides insights that can lead to action. It’s one thing to know sales revenue is up 5%, but without also knowing that your cost of goods is up 6%, you’re missing a crucial piece of information.
- Do I have high-quality data? Knowing your data sources and collection methods for that data are imperative because the worst thing you can have is incorrect or incomplete data, increasing the probability of poor decisions.
An example I can share from personal experience is the data our commercial lenders get from the Arvest Skyline Reports – three in-depth reports on residential, multi-family and commercial real estate in the region.
You’ve probably read news stories referencing Skyline without thinking much about the data in these reports. Arvest commissioned the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business to create this report and to be responsible for data collection. While we release a four-page highlights document for each sector, the full reports are hundreds of pages with incredibly in-depth information. These are used internally to help customers understand the real estate market in which they operate. We also know the quality of this data is top-notch because CBER pays student research assistants to drive through, for example, every residential real estate neighborhood development and manually categorize each lot.
The Skyline Reports are extremely valuable for the bank and our customers. They contain the right data needed to help customers make intelligent decisions. And the quality of the data is unassailable. Interestingly, the idea for Skyline originated in 2004 when one of our executives realized that the regional real estate market was heating up and wondered if we had the data needed to help customers in the event of a real estate slowdown nationally which, as you likely remember, happened just a few years later. Fortunately for Arvest and our customers, we were more and better prepared than most.
That’s the power of good data in business.
Mark Ryan is executive vice president and loan manager for Arvest Bank in Benton County. The opinions expressed are those of the author.