Growing and Managing Your Business IN THIS ISSUE: TODAY BUSINESS STRATEGIES Total Money Management from the professionals at First National Bank
Vincent J. Delie, Jr. Chairman, President and CEO F.N.B. Corporation First National Bank Growing, managing and protecting your business can be a challenge, even in the most favorable economic environments. Those challenges are only magnified as uncertainty in the market and ongoing threats mount — meaning it is more important than ever to have a thorough business plan and trusting relationships with partners who support your goals. FNB has the expertise and resources to support your business so you can continue to grow and thrive through the current economic cycle. Access to capital is at the heart of any business’ success, and in this edition of Business Strategies Today, we discuss lending solutions to help your business meet its capital needs to fund ongoing operations and strategic initiatives. One of the best ways to preserve capital and avoid unexpected expenses is to remain vigilant against threats to your personal and professional success. Fraud continues to be a threat to both consumers and businesses, with advanced and basic forms of deception causing financial and reputational harm. Our Treasury Management experts shed light on some of today’s biggest fraud risks and the steps you and your employees can take to protect your information. It also is prudent to be sure you are aware of emerging financial programs that may benefit your business. One example is capitalizing on a Clean Energy Investment Tax Credit as part of the Inflation Reduction Act of 2022. We understand, too, that it may be difficult for small business owners to access some traditional forms of lending. In those instances, a Small Business Administration (SBA) Loan could be a viable option, and we explain how to plan for the application process. Our team at FNB has the depth of knowledge to help business owners and leaders seek out new opportunities and navigate complex environments. We look forward to building a relationship with you and to supporting your business’ success. THE FIRST NATIONAL BANK DIFFERENCE First National Bank, the largest subsidiary of F.N.B. Corporation (NYSE: FNB), is a growing financial services organization with a long-standing tradition of helping our customers and communities thrive. Throughout more than 150 years of service, we have remained dedicated to providing total money management solutions for our consumer, small business and commercial clients. We have a core business concentration on middle and upper middle market companies and serve their needs as a value-added partner. MORE INSIGHT FROM FNB You can always look to FNB for expertise on the topics and trends that have the greatest impact on you and your business. In Business Strategies Today, experts from across our Company have covered a wide range of subjects, such as making the most of the economic environment, staying the course to innovation and planning for the future of your business. Just a few of the topics we’ve covered recently include: check International Expansion check Interest Rate Management check Payments Solutions check Wealth Management check Succession Planning check Cybersecurity check M&A To learn more about topics that may benefit your business, call us at 1-866-362-4603 or visit fnb-online.com/business 02
04 CAPITAL SOLUTIONS TO SUSTAIN SUCCESS INVESTING IN SOLAR ENERGY PRODUCTION 08 10 06 COMBATING FRAUD TO PROTECT YOUR BUSINESS GROWING YOUR SMALL BUSINESS THROUGH SBA LENDING FULL-SERVICE SOLUTIONS COMMERCIAL BANKING* ▶ Corporate & Business Banking ▶ Investment Real Estate ▶ Builder Financing ▶ Asset-Based Lending ▶ Lease Financing ▶ Capital Markets ▶ Mezzanine Financing ▶ Treasury Management ▶ International Banking ▶ SBA Lending ▶ Government Banking CONSUMER BANKING* ▶ Deposit Products ▶ Mobile & Online Banking ▶ Mortgage Banking ▶ Consumer & Small Business Lending ▶ eStore® Digital Banking Experience * Bank deposit products and services provided by First National Bank of Pennsylvania. Member FDIC. Equal Housing Lender. INSURANCE ▶ Property & Casualty ▶ Employee Benefits ▶ Personal ▶ Title WEALTH MANAGEMENT ▶ Trust & Fiduciary ▶ Retirement Services ▶ Investment Advisory ▶ Brokerage ▶ Private Banking Not FDIC/NCUSIF Insured Not Guaranteed by the First National Bank of Pennsylvania or its affiliates May Lose Value Not Insured by Any Federal Government Agency Not a Bank Deposit First National Bank of Pennsylvania does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. 03
04 FNB-ONLINE.COM SOLUTIONS CAPITAL TO SUSTAIN SUCCESS Whether you are working to build a stable foundation or fund growth, financial capital fuels your company’s success. It is essential that you have a handle on your capital needs and a plan to fulfill them. While the thought of using operating revenue may be appealing when addressing your capital requirements, your business may not be able to support a large-scale investment or growth initiative on its own. Plus, reducing or depleting cash reserves can leave a business vulnerable, particularly during an economic downturn. Fortunately, financial services providers offer an array of options to raise capital — the right solution being one that suits the goals, size and structure of your business; provides manageable terms; and meets the risk appetite of the lender(s).
An unspoken component of any capital raising strategy is the preservation of working capital on an ongoing basis. One way to do this when it comes to your equipment is to pursue leasing options. In a sale-leaseback agreement, your business sells equipment it already owns to a financing partner and then leases the equipment back from them for use. This allows your company to unlock equity capital in its equipment by boosting cash flow to support your initiatives and maintaining access to the assets that power your business. More broadly, leasing equipment also can provide a wide range of benefits, often including: ▶ Lower or no down payments. ▶ Fixed rates that keep payments consistent and are not subject to interest rate hikes in a changing market environment. ▶ Reduced maintenance costs over the life of the lease, depending on the terms of your agreement. ▶ Tax benefits, depending on the size of your company. ▶ More flexibility to replace outdated equipment. LEASING TO PRESERVE CAPITAL Call us at 866-362-4603 to talk with a banker about building a capital raising strategy that can help you sustain and grow your business. Visit fnb-online.com/equipment-financing to contact F.N.B. Equipment Finance and learn more about how leasing can be a valuable piece of your overall business strategy. STRUCTURES AND SOLUTIONS Depending on the amount of capital needed and how it supports your overall business plan, there may be multiple options at your disposal through your bank. Senior Loans can provide financing for capital expenditures, ongoing working capital requirements and growth strategies. Typically secured by company assets and usually the cheapest source of capital, senior loans can provide stability among uncertain market conditions when finding alternative forms of financing can become increasingly difficult. If you are unable to access enough capital through a senior loan for any number of reasons, such as size or credit limitations, consider mezzanine financing, which is a combination of junior or unsecured debt and equity financing and is not as dependent on collateral. Mezzanine loans can help to bridge a financial gap, including when: ▶ Funding a merger or acquisition. ▶ Cash is leaving the business as part of an ownership change or buyout. ▶ All or part of an ownership group wants to maintain the current equity balance. Mezzanine financing is non-dilutive, meaning the borrower(s) keep their current share of the business. Although a more expensive form of debt, mezzanine financing remains a viable and flexible solution in a rising interest rate environment, even when compared with senior forms of lending. There also are times when an investment may require more capital than a single lender can absorb from a risk perspective — and securing multiple lenders on your own is inefficient. With a syndicated loan, your business can obtain financing through a credit facility where one bank will work with other banks to provide the necessary capital. With syndicated loans, you benefit from the efficiency of working directly with one lender, meaning only one set of payments and one set of terms. On the back end, your lead bank manages the coordination, keeping the process simple for you while parsing out risk among multiple financial institutions. CONSIDERATIONS A successful capital strategy depends on detailed planning and engaging partners in the process as soon as possible. Finding a lender that knows you and the business you have built and that has the strength and stability to continue lending in a tight economy can make all the difference in developing the right solution. With any solution, your bank will need to know how much debt your company can support and your ability to pay it back — all of which will be determined during the due diligence and debt underwriting processes. Your plan to raise capital also should account for both favorable and unfavorable rate environments with terms your business can meet without undue stress. For small business owners, read “Growing Your Small Business Through SBA Lending” on page 10 for more on how SBA loans should be considered when size, structure or financial limitations prevent you from securing one of the methods of financing covered above. 05 BUSINESS STRATEGIES TODAY • SPRING 2023
PROTECT COMBATING FRAUD TO YOUR BUSINESS 1Here are two common scams businesses are facing today… CHECK FRAUD Even with fewer checks in circulation, check fraud continues to rise, putting sensitive information at risk of exposure or tampering. Often, criminals steal checks by going through garbage, breaking into mailboxes or, in some cases, by tricking a company employee. Fraudsters can alter the payment amount and payee name, or “wash” the check to make it completely blank and create counterfeit versions. The banking information lifted from the stolen checks also can be used to initiate ACH transfers or digital payments. With fraud taking many different forms, it is more important than ever to make sure you have the processes and training in place to protect your business and your employees. 71% According to a study by the Association for Financial Professionals (AFP), 71% of organizations responding to the survey were subject to attempted and/or actual payments fraud in 2021. FNB-ONLINE.COM 06
S 2 ACT QUICKLY AND MAINTAIN TRANSPARENCY If you suspect or experience fraud, you need to act quickly. Immediately contact your bank to notify them of the suspicious activity. Continually educate your employees on the steps to take when fraud is suspected. Provide transparency into the mitigation process and cultivate an open, constructive environment where employees are comfortable taking necessary action, not afraid or embarrassed to admit a mistake. BUSINESS EMAIL COMPROMISE According to the FBI, Business Email Compromise (BEC) is one of the most financially harmful forms of online crime. By impersonating a familiar source inside your organization (such as the CEO) or an external partner (perhaps a vendor), criminals use name recognition and the trust that comes with it to cause significant financial and reputational damage. For example, an email may come from what appears to be a vendor, sharing a link to a new payment site. In this instance, there is a chance that a fraudster has created a very similar email address in the hope that you will overlook the subtle differences, click the link and upload your payment information. …and some strategies to fight back! PROCESSES AND PROTOCOLS Be sure that you take time each day to reconcile your accounts. While it may seem cumbersome, it is an important step to quickly detect suspicious activity. A product like FNB’s Positive Pay can automate this process, as it is designed to identify, flag and report unauthorized check-based transactions. Bolster your defenses by ensuring employees are well trained to recognize potential threats. In the BEC example, a telephone call to a trusted contact or phone number at the vendor would be a great way to confirm if they had changed payment platforms or if the message was attempted fraud. Similarly, if an employee receives an email from a company executive requesting immediate financial action, it is recommended that you have internal controls and procedures in place to confirm the legitimacy of the email and determine if it is a case of BEC. SEPARATE DUTIES Parsing out duties among multiple employees can help prevent fraud both internally (discovering cases of internal theft or deception) and externally (flagging suspicious activity or changes in payment information). One employee may be responsible for initiating a payment, but a different employee should have review and approval authority. Having multiple layers of authentication also may limit a criminal’s ability to initiate transactions if an employee’s credentials are compromised or stolen. Additionally, utilizing an ACH debit filter product helps to ensure that only authorized transactions post to your accounts and also can improve efficiency and reporting. On the receiving side, the employee(s) responsible for handling incoming checks should not have direct access to other parts of the accounting process where illegal activity could then be covered up. You might also consider lockbox solutions where your bank receives payments directly from vendors or customers via a designated post office box and then processes and deposits the checks in your business account(s). 66% of companies said that Checks were targets of attempted or actual payment fraud in 2021, followed by ACH Debits (37%) and Wire Transfers (32%). Source: 2022 Association for Financial Professionals Payments Fraud & Control Survey For more information about how to protect your business, including tips to shore up your cybersecurity, visit the “Combat Fraud” section of the Business Knowledge Center at fnb-online.com. REMEMBER: Your bank will never call you to ask for personally identifiable information, confirm account information or initiate a transfer. Our team at FNB understands the risk landscape, and our Treasury Management experts can work with your business to develop a fraud prevention program. Call us at 866-362-4603 to get started today. Familiar contact or similar email address Unusual time Asking for sensitive info Prompt to click on a link ! ! ! ! 07 BUSINESS STRATEGIES TODAY • SPRING 2023
ENERGY Under the Inflation Reduction Act of 2022, the Clean Energy Investment Tax Credit (CEITC) has been modified and extended to 2033, providing a 30 percent credit for qualifying investments in renewable energy projects — including solar. The tax credit percentage also can potentially increase based on factors such as project location, labor and material production. With the CEITC providing a cost-effective way to continue growing the green energy space, business owners and real estate developers can establish a longterm investment with significant benefits for their business. Whether a manufacturing facility, office space, parking garage or multifamily complex, companies or developers that hold properties with unused rooftops and land may have a unique option to gain financial benefits through the installation of solar panels. PRODUCTION SOLAR INVESTING IN 08 FNB-ONLINE.COM
GENERATING NEW CASH FLOW When it comes to solar energy, leasing panels and equipment can be an ideal way to maximize your return on an investment. With a lease, the lessor who owns the panels receives the tax credit, which in turn benefits the lessee through reduced borrowing costs. When 100 percent financing is available, the overall upfront costs to your business are reduced or eliminated, further preserving cash flow at the start of the project so that you can continue to invest in other strategic priorities. Throughout the panels’ anticipated 25- to 30-year life span, you can realize sustained financial benefits through the sale of your solar array’s energy to utility companies and/or reduced energy costs for your business or tenants. Engage your tax advisor and a financing partner early to make certain you are exploring all the options available to you, including the opportunities to earn additional tax credits. For more information on the Inflation Reduction Act and the Investment Tax Credit for renewable energy projects, visit treasury.gov. KEEP IN MIND With the world economy still impacted by the effects of the pandemic and ongoing geopolitical events, there are variables to consider when it comes to investing in a solar energy project, including extended lead times for manufacturing and, in turn, installation. Also, demand for panels may increase because of the CEITC extension, adding to potential challenges with availability. If you decide to pursue this type of project, you may be presented with a growing number of companies who are eager to serve as partners with financing, production and installation. Be mindful of the critical element of trust when evaluating your options, as this is a significant investment and restarting the process will add cost and time. Finally, there are recurring annual costs for these projects, such as maintenance and insurance, that will be part of the overall financial strategy you and your financing partner develop. Contact F.N.B. Equipment Finance at 866-362-4603 to start the conversation and see if this type of investment is right for your business. As part of our ongoing commitment to support our clients and communities, FNB continues to deliver financing solutions for eco-friendly initiatives, such as renewable energy. In addition, FNB applies an environmental conscience to its own projects, including new office towers throughout its footprint and the ongoing FNB Financial Center headquarters project in Pittsburgh, Pennsylvania, by ensuring the properties meet high standards for sustainability and safety. FNB’S COMMITMENT FORWARD-THINKING COMPANIES Investing in renewable energy represents your company’s commitment as a responsible corporate citizen — an area of increasing importance as it relates to your company’s performance, reputation and overall impact. According to a 2022 study by the IBM Institute for Business Value, 51% of survey respondents say environmental sustainability is more important to them today than it was 12 months ago. 51% 09 BUSINESS STRATEGIES TODAY • SPRING 2023
10 GROWING YOUR SMALL BUSINESS THROUGH SBA LENDING The strategies highlighted in “Capital Solutions to Sustain Success” (pg. 4) may not be a fit for all businesses, especially new or growing small businesses lacking the size, collateral or financial track record to qualify or those with lower borrowing needs. FNB-ONLINE.COM
you are with the different elements required to secure an SBA loan, the smoother the process may be. Keep the following considerations in mind: BUSINESS PLAN Having a detailed business plan that meticulously demonstrates how you will establish and grow your business is critical, especially if you are buying or starting up a business. FINANCIALS Your company’s financial statements and tax returns from the previous three years will be reviewed, as will your personal financials as the business owner. If you are buying or starting a business, your lender will want to know about your previous financial experience in owning or managing a business to further support your loan application. If you face a situation where a lender may deny a loan due to limitations in your financial background, bringing on an experienced partner could make a difference. Remember this as you compile your holistic business strategy. COLLATERAL The loan purpose and your lender’s requirements will determine how much and what type of collateral is necessary to secure the loan. Both business assets (equipment, real estate, inventory) and Get started by contacting our experts at FNB Small Business Finance at 855-935-6722 or by visiting eStore® at fnb-online.com/estore and selecting the “SBA Loans” product box. And while other lending options exist for small businesses to raise capital, there are limitations that could impact your overall business plan and vision when it comes to strategies such as private equity, borrowing from friends or family, crowdfunding or bringing on additional business partners. One solution to consider is working with your bank to apply for an SBA loan. Working directly with your bank can also provide you with access to the products, services and expertise that help you achieve the goals you have set for yourself and your business. Depending on the reason you need funding (i.e., adding a new location, acquiring a business, buying out a partner, buying a building, a construction project, etc.), there are different types of SBA loans available. SBA loans often offer benefits to you as a borrower that other forms of financing may not provide, including: ▶ Longer, more flexible repayment terms. ▶ Lower down payments. ▶ Different interest rate options to suit your needs. When you start the loan application process, you should be prepared for a thorough examination of your financial background and current or proposed operations. The more information you organize upfront, and the more familiar personal assets (real estate or marketable securities) may be required depending on the loan amount. An SBA loan also typically requires that the borrower carries a life insurance policy that would cover any collateral shortfalls in the event of death before the loan is repaid. First National Bank Small Business Finance has helped businesses across 23 states and Washington, D.C., secure the financing they need to achieve their goals. Learn more about these Success Stories and how your business could be next among them at fnbsmallbusiness.com. With the right plan and an SBA loan to help support your company’s goals, your business has an opportunity to grow. Then, with an established track record of financial success, your business may be in position to pursue more conventional forms of financing that were previously unavailable. Remember that the first, and perhaps most important, step is talking with your banker or trusted financial advisor early in the process. 11 BUSINESS STRATEGIES TODAY • SPRING 2023
President’s “E” Award for Export Service COVID STANDOUT Data as of March 27, 2023 FNB10-260 EQUAL HOUSING LENDER | NMLS #766529 | MEMBER FDIC More bank for my buck. We’re committed to helping the business community do more. We offer a broad array of sophisticated products and solutions, local expertise, and personal assistance to help businesses of all sizes achieve more of their goals. And with our superior capital position, credit reserves and liquidity management, FNB has the strength and stability to be there for our clients through all economic cycles. To learn — and get — more, visit fnb-online.com. Atms 1200+ TOP 50 90+Excellence and Best Brand Awards SINCE 2011 Nearly $44 billion NEARLY $35 Billion in assets in DEPOSITS Approx. 350 Branches 4100+ EMPLOYEES Largest U.S. Bank Holding Companies Coalition Greenwich
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