You go to your bank looking for a loan. You present your financial statements to your banker that shows sales have been growing great over the last couple of years. You think getting approved will be a piece of cake.
Then you get the call. Loan denied. Chances are very high that you will not get the real reason for the denial – bankers are very careful about lender liability.
So what really happened? I had lunch with a banker friend of mine last week. He is very frustrated with business owners because they don’t pay attention to their balance sheet – which means the balance sheet is usually a mess. Yet, this is one of the main documents the bank’s credit analyst uses to review your loan. The income statement is fine and three cheers for the increase in sales. But the rubber meets the road with the balance sheet because that is the document that shows the financial strength of the company today. It tells the analyst how strong your company is, what is the company’s ability to pay the bills for the next 6 months, can the company survive a slow-down in sales, does the owner have skin in the game.
I conducted a non-scientific poll of my business owner friends to see what they would say when asked if they ever look at their balance sheet. The most common response was “isn’t that one of the reports I get from my CPA every month.” That is a bad answer and will most likely cause you troubles with your banker. As a business owner, you need to have someone get involved in reading and interpreting your financial statements.
There is a common theme that runs through all my posts. Business owners do not have anyone to help them evaluate their business from a financial perspective. There is no one with that job title. It is not the role of the bookkeeper or controller, the CPA, the financial planner. And it sure is not the job of the owner. Every single company, without exception, needs guidance from a person that brings true big company CFO services to them. He will help you grow sales without running out of cash, identify the financial land mines and help with the strategy to grow your company.
I’m here to help.