HCB’s Jerry Ernst on Money Radio
President/CEO Jerry Ernst recently joined Mark Asher and Ken Morgan, co-hosts of the “Business For Breakfast” show on Money Radio to talk about the pitfalls of online lenders. Click the media player below to listen to his segment on the show.
(Click here to listen to the full episode.)
INTERVIEWER: Jerry is president and CEO of Horizon Community Bank and he’s on the phone with us, Jerry, good morning to you.
JERRY: Good morning.
INTERVIEWER: Let’s talk about banks: physical banks, buildings and so forth. There’s a possibility that if you need a loan, a personal loan for your business or whatever you’re doing, you’d go in and sit down with a loan officer, tell them what you need, what your collateral is if that’s important, how you’re going to pay them back, all that sort of stuff.
What if I just sat down at my computer and with a couple of clicks, I could find a place to loan me money? What’s wrong with that Jerry?
JERRY: Well, you know from a standpoint of convenience and 24/7 and time savings, which is very valuable to everybody today, there is nothing wrong with it… But how do you know you can trust those people? How do you know that the terms and conditions are going to be what you’re told or are you just being sales pitched into something that can squeeze your company into a very uncomfortable situation? We’ve frequently run into people that have chosen their path because it was easy for them and they thought that they were going to have monthly installments, but then they find that their money is actually being taken out of their checking account on a daily or weekly basis and throwing them into a larger cash flow problem than they had before. So not all online lenders are regulated, in fact most of them are not, and you really have very few places to go and complain if they take your money from you.
INTERVIEWER: And I’ve even heard of bait and switch going on. Is that true?
JERRY: Yeah, a lot of times they’ll tell you, “these are the terms you’re going to get,” and then when you’ve actually executed the contract and get your money, you find out the terms are completely different. The interest rates are comparable to what you’re seeing and reading about the payday lenders, they’re pretty exorbitant. Not everybody is that way, but a lot of them are.
INTERVIEWER: Jerry is the president and CEO of Horizon Community Bank; one of Arizona’s largest SBA lenders and largest chartered banks owned and operated right here in the State of Arizona. Are a lot of the problems that you see our own fault, Jerry? The borrowers, we don’t read through contracts, we don’t pay attention. Everyone is in such a hurry these days. Sometimes you’ve to sit down and take time to get it done right, face-to-face with a handshake and you know what you’re getting into, but we’re in such a hurry in this day and age that sometimes we just gloss over things. That gets us in trouble.
JERRY: That’s part of it, Mark. The other part is the banking industry itself has developed into a cumbersome dinosaur, in some cases, and we have to continue to use new technology to offer better service to people. We’re trying to blend the convenience of approaching us electronically at two o’clock in the morning in your underwear if you choose, along with personal service. It’s just human nature to take the easiest path, and all business people are overstretched, overworked and over-busy, so they do take that easiest path when they can. I just caution people to be very careful and try to do business with people you trust. If you don’t know who you’re doing business with, get some reference checked before you close the deal [and read contracts very, very carefully].
INTERVIEWER: Jerry, the good news for business owners here in Arizona is if they deal with the bank such as yours, Horizon Community Bank, their chances of getting a loan are actually better.
JERRY: Statistically, community banks close more loans per application than large banks and online lenders put together, The most important thing is to recognize that we’re like everybody else. Our cost of doing business has gone up and we’re trying to keep that under control so we can remain competitive in our pricing, but if somebody needs to borrow $50,000 or more, we still personalize and tailor the transaction to that borrower’s needs. We understand their cash flow, then we structure the transaction to match their needs and where we see their ability to repay.
I will tell you quickly that almost every borrower wants a line of credit loan, because it’s perceived that interest-only payments and the convenience of a borrowing only when they need is the best thing for them, but we find a lot of people get a line of credit, which is then drawn up to the maximum and they really don’t have the ability to pay it back to zero. They lose that loan availability, then pay interest indefinitely and don’t get that debt retired. It’s not in their long-term best interests.
So we’ll visit with people about how they really intend to pay the loan back, we’ll understand their cash flow, then we will make suggestions to them about structure so that they’re getting the right amount of money on the right kinds of terms and conditions with the right kind of repayment for their business circumstances.
INTERVIEWER: That all sounds very good. How do people get more information about your bank?
JERRY: HorizonCommunityBank.com. We have an office in Mesa and all the rest of our offices are in the Northwest Arizona. At HorizonCommunityBank.com, you’ll be able to find the closest location, even reach out by email and getting contact with an SBA lender or small business lender.
INTERVIEWER: Very good. Jerry, thank you so much. Jerry Ernst is president and CEO of Horizon Community Bank. Thanks, Jerry, I appreciate the time.
JERRY: I appreciate your time too, guys, thanks.
INTERVIEWER: Five locations of Horizon Community Bank; Lake Havasu City, Parker, Mesa, Quartzsite and Fort Mohave.