Create Bridges: Small Business - Big Rural Impact

Episode 20: Banks and Business - The Power of Local Investment

June 17, 2021 Create Bridges AR Season 1 Episode 20
Create Bridges: Small Business - Big Rural Impact
Episode 20: Banks and Business - The Power of Local Investment
Show Notes Transcript

On this episode, Brandon Mathews visits with Mike Falco, president and CEO of Bank of Salem in Salem, AR and Pat Behrndt, owner of Crown Point Resort in Horseshoe Bend, AR.

Mike and Pat spotlight the power of local investment, the impact it can have on the community, and why tourism and entertainment are so critical to the economy of the Ozark Foothills. Pat discusses challenges they faced during the pandemic in 2020, how he and his staff overcame them and shares his vision of a Crown Point Resort that can attract families from all walks of life including four-legged friends. Mike discusses the banks involvement in Pat’s expansion and outlines what a bank need will need to invest in business project. He shared a list of benefits you can expect from partnering with a local bank over a national bank. He also shares how the economic development of one business can have a positive ripple effect for others.



BUCB1
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Come join us, explore the impact of small business here in rural Arkansas.

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What challenges would you face? Who can help you meet those challenges? How do you get in touch with others like you?

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This is CREATE BRIGES Arkansas and we invite you to come cross these bridges with us.

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Hello, everyone. I'm Brandon Mathews, regional program coordinator for CREATE BRIDGES in the Ozark foothills.

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Today's episode features Mike Falco, president and CEO of Bank of Salem in Salem,

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Arkansas, and Pat Behrndt, owner of Crown Point Resort in Horseshoe in Arkansas.

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Mike and Pat spotlight the power of local investment,

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the impact it can have on the community and why tourism and entertainment are so critical to the economy of the Ozark foothills.

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Pat discusses some of the challenges they faced during the pandemic in 2020,

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how he and his staff overcame those challenges and shares his vision of a Crown Point resort that can attract families from all walks of life,

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including our four legged friends.

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Mike, discussed the banks involvement in Patts expansion and outlines what a bank will need to invest in a business project,

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he shares of benefits you can expect from partnering with the local bank over what you might experience at a national or global chain.

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He also shares how the economic development of one business can have a positive ripple effect for others in the community.

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If you're wanting to start or expand a business and you're feeling anxious about approaching a bank or investor,

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Mike and Pat's story will settle your nerves and lay the groundwork for what you can expect throughout the process.

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So without further ado, here's our episode. Good afternoon, Mike, Pat, thank you for joining me.

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Mike, why don't you start us off, tell us who you are, what you do and what business you're with, OK?

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My name name's Mike Falko. I oversee the daily operations at the Bank of Salem and I also oversee a portion of the bank's loan portfolio.

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I actually studied business in history in college and had the intent of working in a business environment with substantial customer contact.

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And I had the opportunity to work at a community bank shortly out of college, and I remained in that industry ever since.

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Great. And Pat, so good to have you here. And I believe we're in one of your places.

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Tell us where we're at and who you are and what you do. My name is Pat Behrndt and thanks for having me on today, Brandon.

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And we are a Crown Point resort in Horseshoe Bend, Arkansas.

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Mike, why don't you start us off with a little bit of the history of the Bank of Salem,

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how long you guys have been around and maybe just share a little bit about what you all offer to

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small businesses and what you're doing in the community. As far as the bank of Salem's history,

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the Bank of Salem was incorporated in 1908 by local stockholders from the Fulton County area.

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So the banks one 113 years old. In 1982, the bank opened its first branch and Viola, which is west of Salem,

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and 2004 the we opened a branch in Mammoth Spring and this allowed us to serve the entire county of Fulton County.

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The bank also has an independent insurance agency.

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Sabco Insurance. Sabco is located next to the bank on Pickering Street, has an office inside the lobby.

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The bank, the bank presently has 32 full time employees, and our insurance company employs four full time employees.

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Pat, tell us how you came to know Banka Salem. Well, it was kind of unique.

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I had a fellow that was working here at the resort setting up our Wi-Fi system here, and his wife worked at the Bank of Salem.

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I had been searching every bank and in that does business in Arkansas and neglected to ever walk into the Bank of Salem.

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And when I finally did at the advice of this fellow whose wife worked at the bank, I was pleased to find out that they were real receptive.

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And we went on from there.

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It's great to hear about local partnerships and local businesses working with local banks and getting the job done in that vein.

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Mike, would you share some of the advantages of working with a local bank, maybe over choosing a national or online bank?

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Sure. I think there's several reasons that a small business would want to choose a local bank over a national bank, I think.

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For one, small community, banks like the Bank of Salem were typically willing to take a little more risk than the larger banks.

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You know, our success as a community bank is tied to the success of our community and the small businesses that grow and sustain that community.

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We know our communities much better than big banks do.

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And this site allows us to take on a little bit more risk.

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Small banks are generally more flexible and timely. Bankers and community banks like the Bank of Salem typically can act more quickly.

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For instance, we handle all of our decisions on loans and all our document processing at a

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local level so that that allows us to be a lot more timely than larger banks.

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The last two rounds of PPP loans, we were able to submit those loans,

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get those approved and booked quicker and a lot of big banks, which meant our customers were able to receive funds sooner.

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We also have an active local board that enabled us to make quick decisions on any size of a business loan.

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We, also, we typically offer more personalized service.

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If you call the Bank of Salem a person who answers the phone and we're very proud of that. Larger bank,

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you may call an 800 number and have to navigate through a maze of customer representatives just to get a simple answer to a question.

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You will often be able to even call your bank or cell phone or text them and for just simple questions to be answered.

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And have you given that number out to Pat? Pat has it. Yeah, that's great.

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And it's you know, it's our mission as a community bank to serve and build the communities in which we live in.

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I mean, that's that's that's our main mission. We live in our communities that we work in and we raise our children there.

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We work there. And all of our 36 employees I mentioned earlier live in our trade area.

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And you've shared a little bit on this, but are there any other tools or resources, you know, for somebody who's wanted to open a small business,

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you talked about some different types of loans,

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but what can you offer or what advice might you give to a small business owner that says, hey, I've got this idea?

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I think it'll be great. What what would you tell them?

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You know, we offer business checking accounts which include commercial MasterCard, excuse me, commercial MasterCard, debit cards.

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We offer savings accounts and simple IRAs.

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We offer merchant servicing, which is the payment processing, you know, for businesses to complete credit card and debit card transactions.

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And we team up with bank card services, the transaction company.

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That's something that we can help customers with.

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They offer point of sale terminals, they offer mobile products for your smartphone or for your tablet as far as loans go.

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We pretty much finance most business assets, real estate, whether it's a purchase refinance or construction or business, personal property.

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We finance anything from equipment, machinery, inventory and the like.

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We offer business lines of credit for seasonal capital needs, we have used SBA for many years.

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The Bank of Salem has express status with SBA, which means we have 36 hour turnaround for express loans, up to 350000 dollars, which can be helpful.

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We we did participate in SBA PPP loans last year and this year and that was very successful for our customers.

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We will utilize the Arkansas Small Business Technology Development Center in Jonesborough.

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Now, there's an open office in Mountain Home. I haven't had the opportunity to use them yet, but that's a great resource for our customers.

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We offer online banking, mobile banking. I mentioned earlier that we have an insurance company and our insurance company

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offers all kinds of insurance products for personal and commercial insurance needs.

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That is very helpful to our customers having that relationship with with owning Sabco.

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But number one or number one resource, I would say would be our staff.

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We have an experienced local bank staff. By local I mean people that understand the market

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because we live here and we can offer a tremendous amount of insight on what may work,

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what may not work. Well Pat, let's let's turn to you for a minute.

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We've got you and Mike in the room because you guys are partners in some growing development and work here at Crown Resort.

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I drove in and I saw new construction. Tell us what's going on over there.

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Well, right now, we are building an RV park. We started out originally we were going to build 56 units, and since then it's it's turned into 75.

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So in doing so, we were able to create another amenity out there, which we're thrilled about, which which is our mini golf.

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We were able to buy up a former mini golf course and in Jonesboro and we took all the animals from the safari mini golf out there,

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had them all repainted by one of our local art teachers.

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And we're able to implement them in the new mini golf over there, which, by the way, has become wildly successful.

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Just about everybody that comes to the resort, no matter what their ages, even into their 80s, they're playing that mini golf.

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Sometimes people play it every day that they're staying here at the resort.

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So it's gone over very, very well. We built the basketball court over there.

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Soon we'll be building a pickleball court,

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which we've found has been very popular amongst RVers in the area or not in the area, in the states, across the states.

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Matter of fact, we also have walking trails up there in the woods and they get used quite often.

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We found that a lot of these areas are a lot more active than regular resort goers.

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They've found a lot of things to do on the trails. And we've also had some bikers going through there.

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The trails have been successful as well. We also built a general store or a mini mart out there that we're going to use for check in.

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We built shower rooms. We've got four beautiful shower rooms, all tile and a couple of the bathrooms for the participants in the mini golf.

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Soon we're going to finish up our new beach.

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We also have an existing beach, but we're going to put a new beach where the RV'ers can bring their dogs to.

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Right now, we don't we don't have dogs on the resort itself.

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We do allow them in the RV park.

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And so we are building the second beach to allow for the the the guests with dogs to to have a place to run with their dogs.

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We just completed our our dog park.

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Rough house, dog park named by my wife, but yeah, we just got done building that and it gets daily use, which is great to see tying this all together.

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What ultimately led to you deciding to work with, you know, the local bank here?

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When we approached the Bank of Salem, we were looking to refinance our existing debt and borrow enough to expand into the RV business.

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The timing couldn't have been better. Of course, Mike was very cooperative and we were able to, in a timely fashion,

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get get a loan enough to build the RV park and the other amenities that went along with it.

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What were some of the obstacles that you've run into in expanding your business?

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Well, now, with the covid, the problems that we've run into is finding employment.

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Unfortunately, there aren't a lot of workers out, there are people that want to work today.

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Yeah, and so has that just been in getting professionals out here?

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You know, when it comes to construction, are you talking about your, you know, employees finding employees to be able to run the resort?

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Well, I have a great staff here. I have a very well educated staff.

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And just like the Bank of Salem, I've been able to run with what we have.

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But to bring in new people to do construction, unfortunately, this area doesn't have a lot of contractors.

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And that's been one of our obstacles, is finding properly trained contractors, equipped enough to to be able to finish the projects.

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We are hoping, though, that we will be completed at least by the beginning or middle of June.

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And so we should be ready to go by then. Say one of our listeners here is maybe thinking, how do I approach our local bank?

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What kind of things did you prepare to show them that this was worth investing in?

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We had to show projections and we did rely on rentals and sales from past years.

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Of course, 19 or 2019 was it was a very good year,

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And that was the year that I approached the bank.

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Unfortunately, within eight months we were in the middle of the pandemic and we were pretty much shut down.

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It might have scared the bank a little bit. No, but I think we made out all right.

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Oh, yeah. This year is going to be phenomenal. We obviously had to show the projections.

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Having a 72 unit RV park or a 75 unit RV park at this time could be very, very beneficial.

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We feel good about the numbers that we showed the bank and and I'm sure that they're going to be very happy with it themselves.

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Yeah, we started with the cost of the project and then we went into the historical cash flow and income into the projections

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just like Pat saying. No, unfortunately, we don't have the park completed yet,

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but it'll be better than we projected because the pandemic has brought people to the RV business more than than they had been in the past.

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RV sales have been through the roof, as we all know, and fortunately, all the RV resorts are full.

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So so we're going to be in good shape here. And we picked the right time to pick the right business. Yeah, when it came to the bank

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he had been studying the RV trends before the pandemic and the pandemic just sped that up.

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Mike, it's probably fair to say that doing the research, doing the market analysis,

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having a business plan, being a big project like you're going to need to bring those things.

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Oh, yeah. Yeah. We're going to need to know the hard costs. You're going to have to do your homework.

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You're going to have to have a realistic business plan.

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As far as the bank is concerned, we know where we're going to look at what kind of debt your business can cash for, pay for historically.

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And then you know what it can afford to pay for if you add the additional debt and how that impacts your cash flow and your debt payment ability.

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We're going to look at also your what the owner has invested in as far as his his money,

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his equity or his or hers and and see how much skin they have in the game.

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One of the other problems that we had during the pandemic is cost overruns, as we all know, everything is going up in price.

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And if we had finished the project three, four or five months ago, we might have been all right.

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But unfortunately, now the costs are going up and we do have quite a few cost overruns.

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So we had to go obviously back to the bank and ask them for a second loan.

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And and they're cooperating with that right now. And so we're even though we've had some cash overruns we're going to be in good shape here.

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Pat, you mentioned you had to sit down for some time. You are here.

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You are doing business. You're expanding. You know, Mike here and their bank, they, Bank of Salem, they believe in you.

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What was resilient about what you were doing? Why were you able to survive? Well, there's no doubt that the pandemic hit us hard.

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But the silver lining was the increase

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sales at Papa Dick's Pizza, which is our onsite restaurant bar. We grew we actually grew during the pandemic mainly because of our local support.

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But once the resort opened back up, we really had to pick up the pace.

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Our greatest problem now is getting enough product.

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We have we have also had a problem with labor and the lack of labor.

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The resort is set up naturally to attract guests that are concerned with social distancing.

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So we filled we filled up soon after the restrictions were lifted.

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And we anticipate, obviously, one of our best years ever.

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Are there any technologies you adopted or new processes more or less demanded by the pandemic, but now are things that you think might stick around?

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Well, about the time that the pandemic hit, we started working with with a company called Booking.com and also Expedia.com.

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Now, if you look at all the different booking sites, they all fall under either booking.com or Expedia.

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Of course, we are Airbnb and Hotels.com.

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And we went to them and we added their reservation systems to our websites and and also to our booking software.

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And of course, during this time, we are able to use Facebook and other social sites,

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social media sites to increase our occupancy. So far occupancies are coming back very, very strong this year.

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Our rentals are greater than ever. We're back. And we also have QR codes that we're using for pop addicts and we put QR codes and all the

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on site units and condominiums and cabins and people use those to to order directly online.

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And so we've been real successful using modern technologies today.

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Can you talk a little bit about the economic impact and how that might trickle out to other businesses?

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Yeah, well, yesterday I got up early Sunday morning and and we have a lot of checkouts on Sunday morning.

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And I took a little walk around the resort and which I do every day.

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But this time I walked around specifically to note the license plates.

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You want an idea where your people are coming from. Well, as I walked around, I counted 47 cars.

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And, you know, multiple people come in cars, sometimes they take up multiple units, we have 66 units all together, but there was 47 cars.

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And out of the 47 cars, there's 13 different states and only three of them were from Arkansas.

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So if you look at that and we're not competing for the Arkansas vacation dollar, we're bringing in new vacation dollars to Arkansas.

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Last year we had 11 guests that we know of that purchased homes nearby as a result of their staying here at Crown Point Resort.

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That's 11 new people that moved to this area as a result of that.

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So we've noticed that as we have grown, the local businesses have expanded.

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Five years ago, you couldn't buy groceries or quality groceries in this town or reasonably priced gas.

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But now we encourage all of our guests to go and buy local groceries, to buy their gas locally, go to the dollar store, putting a pencil to it.

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We have figured that our financial impact to the community is about $8.5 million dollars a year, which is quite tremendous.

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Yeah, that's terrific. That is exactly what our hope and talking to business owners through CREATE BRIDGES.

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Mike, with all that growth, what other types of, you know,

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businesses or industry would you like to see grow and succeed that maybe we haven't had too much of in the past,

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but would be a great thing to have here in our community?

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Well, it would be nice to have some small manufacturing business in this trade area, more that we have.

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And I know we have some coming to Ash Flat soon, but it would be nice to see

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that in this tri county area, uh, because, again, that's the same economic effect.

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Those people live here. They work here. They buy their groceries here. They buy their gas here.

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And, uh, you know, they spend their money at the dollar store here and the bank with us.

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I mean, that's that's one area here. And other would be it would be nice to see a little bit maybe, maybe another restaurant or two in the area.

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Pat, sorry. We can use them, you know, we go out and eat too much.

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OK, because we we do lack that in this area.

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And I think if it's a quality restaurant, like Pat runs, Papa Dicks, it could it could be successful.

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Well, Pat, so much of our conversation with you today has been about, you know, what's to come.

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You know what, the expansions and new renovations and some innovations here when you're talking about who your primary visitor is,

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what's kind of the person you have in mind or what's the type individual family

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that you're looking to attract here to Horsehoe Bend. Dduring the summer months

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we have a lot of grandma and grandpa with grandchildren. We don't attract so many young families.

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It seems that that is becoming the trend now is that we are getting the younger families coming in, which makes us happy.

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I've sat out and every morning I have coffee out in front of the rec center and and talk to the guests as they walk by.

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And quite often I talk to people in their 60s or 70s that said they've been coming here for 30 years, which is really neat.

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And they said, well, my parents brought us here. So we love to hear that and ideally we would like to attract more younger families.

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It is quite expensive for them to vacation. But I heard some encouraging news on CBS last night where they said that 20 percent of millennials

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now are are planning on spending up to three thousand dollars on a vacation in the next year.

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That was real encouraging.

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So that might be stimulus money, but it does it is very encouraging and we're hoping to start attracting some more of those people here.

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Well, Mike, what advice would you give to a aspiring or current business owner that's here in the Ozark foothills?

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Well, I think the the biggest obstacle I typically see is unrealistic expectations.

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And so go back to what Pat said about planning

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is very important. Someone told me one time the measure twice before you cut once,

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and I believe that's the truth. I'd make sure you have a good understanding of your costs.

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Make sure you have a good understanding of what the additional debt that you're going to have.

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Also understand your your personal investment in the project.

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Uh, also, you need to consider your time.

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I know this is, in this business is Pat's life, it's 24/7 and I think sometimes business owners that are new maybe don't realize that.

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Also, if you're if you're starting a new business, I would definitely have some type of a contingency plan.

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And also I would, uh, possibly even consider, um, grow expanding the business in phases if if that made more sense.

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So those are those are a few things I would consider. wat, What about you?

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Anything that you hadn't got a chance to share? If I were going to advise somebody on getting into this business

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I would try to advise them to do your research in the industry.

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And study your location, create your plan.

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And know that nothing's going to happen overnight. And try to live within your means. Wise lessons indeed.

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Well, Mike, Pat, thank you once again for both joining me today and Pat for hosting us for this recording down here at the resort.

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You've got a beautiful place and I hope those who are listening get a chance to check it out.

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For more information about this or any CREATE BRIDGES podcast or more about CREATE BRIDGES in Arkansas,

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visit uaex.uada.edu/createbridges. The CREATE BRIDGES 

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Small Business Big Rural Impact podcast is made possible by a Wal-Mart grant to the University of Arkansas System Division of Agriculture,

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Cooperative Extension, Community Professional and Economic Development Unit and White River Now Productions.