The Constant Entrepreneur: Advice for Running a Productive Business

Banker – a business owners best friend

I had breakfast this morning with a business banker. He lamented the fact that so many business owners do establish relationships with their bankers and thus do not understand how banks can work for them. Many business owners wait until they are desparate for money before asking for a business loan – often that is too late.

A bank needs to be assured that a borrower can indeed repay monies that the bank has loaned. As the person responsible to see that the loan is repaid is the business owner, the bank will make the owner personally responsible for the loan. If the banker sees a low FICO credit score, personal and business tax returns showing minimal income, and business cash flow that will not sustain the servicing of the loan, the chances are next to impossible to get a loan. The banker will also want to see sufficient collateral to back up a loan. Which is why often the best and easiest way to borrow money is to obtain an equity line of credit against the owner’s home.

Some business owners are reluctant to risk a home line of credit. But, even if not using the home as collateral, the risk is really not diminished when the owner personally signs for a business loan.

Getting back to obtaining credit when it is not needed. When times are good, the bank will see little risk due to sufficient income, cash flow, and credit scores. Then, when times are not so good, you can tap into the line of credit as needed.

Once a relationship is estalished with a banker, nurture the relationship. Meet with the banker at least quarterly and provide current financial statements. Talk about the future of your business and ask for the bankers financial advice. Most important, if you anticipate that you will be defaulting on a payment, alert the banker before the fact. Most banks will work with you if you are honest and open with them, and keep your lines of communications open.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com