You want the best for your business, so it only makes sense that you surround yourself with like-minded individuals. As a business owner it’s important to get support from business advisors who have expertise in specific areas to help you make your business successful. Your CPA plays a critical role for you, but don’t forget about the others. It’s also important to cultivate relationships with a business attorney and business banker.
Your CPA can make sure that you have systems to capture and report timely, reliable financial information and, if needed, even provide assurance regarding your financial statements. A good attorney can help safeguard your business assets and provide assistance in drafting agreements, contracts and other legal proceedings. A business banker can provide lines of credit or loans to help meet the cash flow needs of your business.
The Importance of Your Banking Relationship
Strong banking relationships are built over time through regular two-way communication. You should be well-versed in upcoming cash needs, such as expanding inventory or the increased needs of personnel cost, and communicate these to your banker. As you keep them informed of business decisions and trends, this helps to build a lender’s confidence in your ability to manage your business. A well-informed and communicative business owner may be given extra consideration when business financial issues arise.
Four Key Indicators That Help Bankers Evaluate Your Ability To Repay
Banking is a low-risk industry and they have one major concern when lending money: your repayment. They evaluate your ability to repay based on these four areas:
- Cash Flow – This is a key indicator of your ability to repay the original loan. If you have strong cash flow, the chances are high that you are able to repay your loan.
- Collateral – When a loan is originated, it’s never the goal for the loan to be foreclosed on and collateral seized, but it is required as security.
- Credit – Another key indicator is your credit history and track record of your past ability and willingness to fulfill prior financial obligations. If you have a good credit score, you’ll be given more favorable treatment in both the receipt of a loan and the amount of interest charged.
- Character – Your relationship with your banker allows them to consider your integrity. It’s critical to let your actions meet or exceed the expectations your words establish on a regular basis.
A good business banker is your advocate – they’re in your corner. Like CPAs, business bankers are exposed to multiple businesses and industries and they can be a great sounding board for ideas and help you strategize on ways to reach your financial objectives.
Business Relationship Help
Need to round out your business advisory team? Contact Rea & Associates. We can provide accounting services and business consulting services to your business, but we can also connect you to other business professionals that can help you complete your business advisory team.
Author: Chris Roush, CPA (Millersburg office)
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