Both small business owners and corporate executives should maintain regular communication with bankers, even when they are not seeking immediate financing. These conversations should extend beyond the banker simply promoting their institution as an ideal partner. Instead, business owners should strive to comprehend how their company aligns with the bank’s credit standards. Regardless of whether the company currently holds a loan with the bank, having knowledge about their eligibility for loans, both presently and in the future, can greatly benefit the company’s strategic planning efforts.
Maintaining regular communication with your banker is crucial for small business owners and corporate executives, even when you’re not currently in need of funding. These discussions should delve deeper than just the bank promoting its services; it’s about understanding where your company stands in relation to their credit standards. By knowing whether you would qualify for a loan now or in the future, you can make informed decisions and effectively plan for your company’s growth.
During these conversations, the banker will likely assess:
- Your company’s cash flow in relation to its existing debt
- Recent trends in your sales and profit growth
- Your business’s liquidity, which refers to the ease of converting your company’s assets into cash
- Collateral, such as accounts receivable, inventory, or real estate
- Your business credit history
While the banker may not be able to provide a definitive answer during the initial conversation, a knowledgeable loan officer will assist you in understanding how closely your company aligns with their lending criteria. Some banks have automated their credit approval process to the extent that the person you speak with may not be aware of the bank’s specific standards. However, there are still many banks where dedicated individuals can guide you in comprehending the key standards they uphold.
Recessions often present attractive buying opportunities for companies with the right financials. Some businesses become available for acquisition, and others may sell off land or used equipment. In certain cases, new equipment might be available if a buyer has canceled an order. Having good personal and business credit puts your company in a favorable position to capitalize on these opportunities. Engaging in early conversations and developing a personable relationship with bankers will expedite the process and enable you to seize these opportunities promptly. Remember, building a strong relationship with your banker goes beyond mere transactions; it involves understanding your company’s financial standing, exploring growth possibilities, and making informed decisions that drive your business forward.
