How to Make Any Business Financeable (Part 1 of 4)
It doesn’t matter why you need the money, you just know that if you had a little cash your problems would go away and you could grow your business. Whether a small loan to move you along or a large project that needs capital to service, here are some tips to help your company attract the attention of the people with money. I will not only tell you what they want to see, I will tell you how to create that picture.
There are four major factors that influence the decision of a potential lender as to whether or not to lend money to your company. Those factors are:
- Cash Flow
- Profitability/Financial Trends
- Leverage/Overall Debt
- Collateral
Of the four, cash flow is the most important. The company must demonstrate that it can service the new debt and still pay existing expenses.
In refinancing existing debt, reliable payment history can help demonstrate your ability to pay larger payments created by the new loan. In some cases, your company may need to make some changes to create the additional cash flow needed to service added debt. According to Christine Christian, CEO of Dun & Bradstreet, 80% of all businesses fail due to poor cash management. Banks realize this and it is therefore easy to understand why they will look for good cash management as a necessary strength from you for your business. Strong cash management can also play a role in getting more favorable terms for the new debt.
In the next three parts of this series, we’ll dive deeper into the remaining key factors: Profitability and Financial Trends, Leverage and Debt, and Collateral. You’ll learn what lenders are really looking for, how to position your business for approval, and practical ways to strengthen each area. If you’re ready to make your business more attractive to lenders or need help preparing your financials, contact us today. Our team is here to help you build the roadmap to funding success.
