Teamwork Makes the Dream Work: Exit Planning from a Commercial Lender’s Perspective

Planning for the eventual exit from a business is a critical yet often overlooked aspect of entrepreneurship. Whether you're considering retirement, passing the torch to a successor, or exploring new ventures, First Mid is committed to providing proactive guidance and expert support at every stage of your business transition. We interviewed the late Jim Reynolds, First Mid Commercial Lender out of McHenry, IL, for his expertise on exit planning from a banking perspective.

1. What is your experience with exit and succession planning? What type of business clients have you worked with on this process?

Phil Whitehead, Community Bank President in Janesville, WI, and I both received extensive training from the Business Enterprise Institute in Denver, CO, and hold the Certified Exit Planner designation. First Mid's Commercial Lending team in Northern Illinois and Southern Wisconsin uses an exit planning assessment tool to guide business owners through the complex issues of the exit process. Over the past four years, we have worked with a diverse range of clients, including manufacturers, professional service providers, medical practitioners, real estate experts, and marketing firms.

2. What role does commercial lending play in exit planning?

Commercial lending is crucial in the exit planning process, impacting various stages: pre-exit, at-exit, and post-exit.

Pre-exit, there are several financial opportunities, including upgrading equipment to boost efficiency and cash flow, financing the growth of accounts receivable and inventory to increase business value, and offering early ownership buy-in options for family members and key managers as part of the exit strategy.

At-exit, the primary financing opportunity involves funding the acquisition of business assets or stock.

Post-exit, commercial lenders can foster relationships with the new owner and provide ongoing financing solutions to support future growth.

3. How do commercial lenders support businesses in exit planning?

Commercial lenders bring valuable experience in financing similar opportunities and provide access to a network of professionals who can ensure a smooth process for our clients. This network includes business valuation specialists, exit planners, attorneys, accountants, tax advisors, business brokers, growth advisors, and more.

4. What other types of professionals can assist businesses with exit planning?

Exit planning is a team sport. Wealth management advisors and insurance agents provide valuable components in the process, along with non-bank advisors who can provide critical services and advice along the way. With First Mid's diverse range of business lines, we are positioned to make those connections for business owners.

First Mid's wealth management advisors can offer financial planning to help owners understand their personal cash flow needs and achieve their customized objectives after the sale. Additionally, they can offer money management and investment advice during the planning process and after the funds are received from the sale.

First Mid's insurance team can provide protection products for contingency and estate planning, typically using life insurance and disability tools.

5. When do businesses typically begin exit and succession planning? Does First Mid provide proactive guidance on timing?

Exit timing varies for each business. While every business owner will eventually exit their business, the exact timing is often uncertain. Unexpected events, such as death or disability, can lead to an abrupt exit, making contingency planning a crucial starting point for nearly every business. Ideally, exit planning should begin three to 10 years before the sale. However, this timeline may vary depending on factors like emerging health issues, tax minimization strategies, and the training and mentoring of next-generation family owners.

6. Does First Mid actively collaborate with external partners, such as accountants and attorneys, to provide comprehensive customer support in this process?

Collaborating with external partners is essential for effectively positioning the business owner to achieve their tailored objectives.

Planning for your business transition is crucial and needs careful thought. At First Mid, we combine our commercial lending expertise with wealth management, insurance, and a network of industry professionals to ensure your business transition is smooth and beneficial. Start planning with First Mid today to make sure your business future aligns with your goals.

We are deeply saddened to announce the passing of Jim Reynolds, a dedicated member of our team since 2017. He served as Senior Vice President of Market Leader Business Banking in McHenry County, IL, before becoming Community Bank President following First Mid Bank & Trust's acquisition of Blackhawk Bank in December 2023. With a wealth of experience in the banking industry since 1995 and a degree in Economics from Rockford University, Jim's insights and leadership were invaluable to us. Our heartfelt condolences go out to his family during this difficult time. He will be profoundly missed by all.

Equal Opportunity Lender.

Insurance products are offered through First Mid Insurance Group. First Mid Insurance Group, Inc. is a wholly-owned subsidiary of First Mid Bancshares, Inc. and an affiliate of First Mid Bank & Trust, N.A.

Insurance products and services offered through First Mid Insurance Group are not deposits or obligations of the bank, are not insured by the FDIC or any governmental agency, are not guaranteed, and may lose value.

Wealth management products and services offered through First Mid Wealth Management. Non-deposit products and services through First Mid Wealth Management are not insured by the FDIC, are not bank deposits, are not guaranteed, and may lose value.

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