Wednesday, December 22, 2010

Improve Your Chances for Bank Loans:

We all know that banks have severely tightened their loan approval processes. It used to be easy to get a credit line expansion or a favorable accounts receivable loan; not any more! During this recession, banks have become so risk averse that only a pristine balance sheet guarantees you’ll get the money you need to run and expand your business. And sometimes that’s only if the gods are on your side.

So, what can you do? Here are two strategies that will improve your chances of getting the cash:

1) Step up your auditing procedures. Sit down with your accountant at least twice a month a review every invoice not just for accuracy but for how vital the service or product you’re receiving. You may be paying for a janitorial service that could easily be done by your employees. Or, do you really need to have an outside coffee service? There are probably numerous expenses that could be trimmed. We all know that trimming expenses improves the bottom line which hopefully, improves the chances the banker won’t be so tight fisted.

2) Are you billing once a month? If so, change to billing every two weeks or better yet, weekly. Also, you may be able to change the terms of your sales to a15 day billing cycle vs. 30. And, review all accounts receivables once a month. As soon as they flop over beyond a current status, have your accountant make a phone call. If they get beyond 60 days owing, send out a letter followed up two days later with another phone call. Shortening receivables will not only improve cash flow, but you’ll also increase the look of your financials which will help your banker justify that needed loan.

These are tough times that require a disciplined approach to all financial matters. The above two suggestions may help your company get the financing you need.

Next Week’s Blog: Cash Management:

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