We help many small businesses in our firm from start up to mature businesses (15 to 20 years). With all new businesses, I try to always say, “Your banker is your best friend,” as this can provide your company with bridge financing to help during the negative cash flow period.
You can help the bankers make the correct decision by following a few choice actions:
- Send timely quarterly financial statements for their review. Statements are timely if they are received within 45 days after quarter end or 90 days after year end.
- Call your banker and keep him or her alert for any problems as they arise. This involvement allows the banker to become part of the solution.
- Always have a year-end profit in your company. Do this even if it means you taking less or no salary. This means so much during the loan review. You never have to explain a profit but you always have to explain a loss.
- Balance between tax planning and money taken out of your company. A good net worth in your company ensures your banker’s continued support.
- Keep your loans current. This should be considered a top priority. Pay your loans before your accounts payable. The banker is happy to advance more funds only if your present loans are current.
Your banker truly is your best friend and, if treated properly, will provide financing for future equipment purchases, cash flow shortages, mergers, and if you are lucky, a free game of golf.
Frederick Sitzberger is president of Sitzberger, Hau & Co. S.C. in Brookfield.