Obtaining Financing In Tough Economic Times | Sovereign Bank exec gives advice on getting money
In today’s tough economic times, many businesses are finding it difficult to make their way through turbulent waters. Some are veering off course while others are doing everything just to stay afloat.
As the Federal Reserve recently noted, adding to the unstable mix is the fact that tightening credit conditions are forcing financial institutions to raise lending standards for loans to businesses. These restrictions may affect your business financing, but they don’t have to mean disaster for your business.
Make Friends
Now more than ever, it’s important for businesses to maintain, and indeed strengthen, their relationships with their business bankers.
Just as banks gain comfort from business owners who have managed through adversity, businesses can benefit from a knowledgeable banker who has successfully navigated through various economic cycles.
Banks and their businesses customers have the same objective — a successful company. Understand, however, that the more your banker knows about you, your business and your plans, the better advice and solutions he/she can offer, especially during an uncertain economy.
One typical misconception is that a banker and a business owner are on different teams. But that’s not the case at all. Both should have the same goal in mind: fostering a business success story.
Accordingly, some businesses may need to share more information than has been necessary in the past, especially for those that have seen a slip in performance. Don’t be fearful of this type of request from your banker. He or she just needs the right information to help guide you in your financial decision-making.
A common mistake that businesses make, particularly during a favorable economy, is the failure to retain adequate net worth to sustain operations through unexpected events or economic downturns.
While credit is often essential to support a company, an experienced banker can offer alternative solutions, and more importantly, practical advice to help businesses improve cash flow and financial condition.
By The Numbers
But before solutions can be offered, businesses need to review their financial performance and condition — both favorable and unfavorable — as well as any obstacles or potential pitfalls that could knock them off course.
With the help of their banker, they can develop a sound, solid plan to confront and overcome any hurdles.
By doing so, they will build credibility and trust with their banker. And they will be better prepared to manage their company over the long term.
Adequate preparation can make it easier to steer through waves of an economic cycle, but businesses don’t need to go it alone.
By working closely with their banker and being open and frank about the state of their operations and finances, they can set a course of sustainability and profitability for years to come.
John Merrill is market president for Sovereign Bank in Massachusetts.
WBJ Web Partners
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