A good banker has your best interests at heart and can be a key advisor to your business. Not only do commercial lenders provide lines of credit and short term cash flow, but they can also offer import/export cash management and protection assistance, cash for expansion and growth, and advice and counsel about a number of issues related to your business. Of course bankers can’t tell you how to run your business and they walk a fine line to keep the regulators happy, but most mid-market bankers I know are excited to help their clients in any way they can.
So what does a banker look for in a well-managed, bankable business? First and foremost, the ideal owner is honest, realistic and communicates openly with accurate information. They have a clear strategy and the team to execute it. They have a strong succession plan and allow their team to run the day-to-day aspects of the business while they focus on developing a vision and strategy for growth and profitability.
Second, bankers tend to focus on the balance sheet more than the income statement. Of course they want the company to be profitable, but over the years, I’ve seen many “profitable” companies run out of cash and end up in the ditch. Bankers look for a strong relationship between asset and liabilities and a short cash-to-cash cycle, which is the number of days from when you spend a dollar on goods and services to when you get it back from the customer. Inventory is a particularly big part of that.
Third, bankers look at how companies manage capacity. Is the company ready for growth? Do they have the resources to support it? Do you need to work with your banker on a capital line to support expansion?
Use your banker as a key advisor. They can have a useful perspective on your company, and if they don’t, perhaps it’s time to seek a new banker. Your successful future might depend on it.
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