Bankable: Giving Small Businesses Credit
Whether the economic environment is “friendly” or not, small businesses will turn to their banks to secure lines of credit and get funding to smooth out bumps in cash flow and availability. Getting credit is always a challenge, even in the best of times. When the economy stalls and times are tough, getting the necessary cash to support the business gets even tougher.
A recent post on blogs.wsj.com (Wallstreet Journal) discusses the results of a survey (Federal Reserve Bank of New York’s Small Business Borrowers Poll), where it was revealed that “small-business owners in New York, New Jersey and Connecticut are still struggling to acquire credit for day-to-day expenses and expansion”. What a surprise. Times are tough, and the banks need to manage their risk and increase the predictability of repayment for loans and lines of credit. If accountants are looking for reasons to adopt and implement analytics and forecasting for their clients, there you go.
Accounting professionals can help their clients get the credit they need, by helping demonstrate how “bankable” the business is. Here are three ways to improve the odds when trying to get financing for the business (and where the accounting professional can be a pivotal player), according to an article on Bloomberg Businessweek: Three Ways to Make Your Small Business “Bankable”
1. Tighten up your books. The value of good financial reporting cannot be understated. By being able to demonstrate profitability and a strong balance sheet, you reduce the ambiguity that is often present in a small business’s financial statements. Banks look to manage their risk and increase their predictability with the loans and lines of credit they give. Owners who can do that for them will stand a better chance of getting approved.
2. Showcase your strategic thinking. Give financial institutions an idea of how your strategy will help your bottom line. Broad brush strokes won’t cut it here. Provide specifics as well as the quantitative and qualitative reasoning behind it.
3. Get some help. Although most small businesses don’t require a full time chief financial officer, many should consider hiring a reputable, outsourced accounting firm. The right one will give you a better understanding of your company finances.