Building a Successful Financial Review Board

Guidelines for Effective Loan Decision-Making

What is the Financial Review Board (FRB)?

The eCommunity Financial Review Board (FRB) plays a crucial role in supporting local entrepreneurs by evaluating loan applications for business startups, expansions, or purchases through the Network Kansas Revolving Loan Fund, also known as the eCommunity Loan Fund. This board is responsible for assessing risk, approving funding, and providing guidance to ensure the success of businesses in the community. These funds are provided to local eCommunities by Network Kansas and the eCommunities are tasked with being good stewards of these dollars while building and supporting their local economy.

Who Should Be on the Financial Review Board?

The FRB is typically a subset of the eCommunity Leadership Team and meets as needed to review loan applications. Members should:
✔️ Have experience in business finance, lending, or economic development.
✔️ Be willing to mentor entrepreneurs and connect them with resources.
✔️ Understand that eCommunity loan applications often involve higher risk, requiring creative problem-solving and additional financial support options.

Recommended FRB Members

🔹 Banking professionals – Understand lending structures and financial viability.
🔹 Economic development leaders – Provide connections to local resources.
🔹 Small business owners – Offer real-world entrepreneurial perspectives.
🔹 Accountants & financial advisors – Assess financial feasibility.
🔹 Legal professionals – Assist with structuring deals and compliance.

Responsibilities of the Financial Review Board

eCommunity loan funds are designed as gap financing, meaning they should serve as the final piece of the funding puzzle when other sources have been maximized.

Key Duties

📌 Evaluate Loan Applications

Review business plans and financial projections, with a focus on cash flow.
Assess the applicant’s experience, commitment, and feasibility of success.
Use a standardized rubric to rate applications based on financial feasibility, growth potential, community impact, and other factors.

📌 Conduct Applicant Interviews (if necessary)

Ask clarifying questions about the business model, funding sources, and operational plans.

📌 Collaborate with Lending Institutions

Work with banks, credit unions, and other capital sources who may co-fund projects.
Ensure lenders understand that eCommunity funds support, not compete with, traditional financing.

📌 Approve or Deny Loan Applications

Make decisions based on business viability and community impact.
Ensure funding aligns with the eCommunity’s objectives and guidelines.

📌 Maintain a Strong, Active Board

Regularly review board composition to ensure engagement and expertise.
Maintain an updated list of members with contact information for transparency.

Loan Decision Criteria

Each loan application is evaluated based on a standardized scoring system. Considerations include:

✅ Financial Feasibility & Business Soundness
✅ Owner’s Experience & Readiness
✅ Strength of Business Plan & Cash Flow Projections
✅ Potential Economic & Community Impact
✅ Third-Party & Owner Investment
✅ Partnerships with Business Development Organizations
✅ Quality of Life & Job Creation Potential

Rules & Policies

Conflict of Interest Policy

🚨 If an FRB member is:

A loan applicant → They must recuse themselves from discussions and decisions.
A bank representative funding the applicant’s project → They should abstain from voting on that loan.

Approved Uses of Loan Funds

✔️ Land & real estate purchases
✔️ Business inventory & equipment
✔️ Business acquisition (including goodwill/blue sky)
✔️ Working capital
✔️ Building renovations tied to a specific business

🚫 Funds CANNOT be used for:
✖️ Refinancing debt
✖️ Salaries or owner draws
✖️ Payroll taxes
✖️ Personal vehicles

Each eCommunity can define additional restrictions based on local priorities.

Best Practices from Successful FRBs

🔹 Educate Local Banks – Ensure they understand that eCommunity funds help them reduce risk and close deals they might otherwise reject.
🔹 Encourage Applicants to Take Ownership – Those who write their own business plans tend to be more committed and prepared.
🔹 Hard Work ≠ Business Success – Passion is great, but sound business planning is essential.
🔹 Industry-Specific Expertise Matters – Just because someone loves to cook doesn’t mean they know how to run a restaurant.
🔹 Balance Structure & Flexibility – Clear policies are important, but allow room to incentivize high-impact projects.
🔹 Regular Communication is Key – Economic development professionals and board members should stay in touch to keep processes efficient.
🔹 Leverage SBDC & Other Resources – Small Business Development Centers (SBDC) can help applicants strengthen their business plans and cash flow projections.
🔹 Keep Deadlines Flexible, But Be Efficient – A rigid schedule can deter entrepreneurs, but clear expectations on processing time are essential.

Building a Strong Financial Review Board Starts Today!

By following these best practices, your Financial Review Board can make a lasting impact on local entrepreneurship and economic growth.

Ready to support your community’s entrepreneurs? Build your Financial Review Board today!