We have received calls from a lot of Utah businesses that are struggling to get, or in some cases renew, their business banking loans and lines of credit. Loans that were a ‘sure thing’ two years ago are routinely declined now as banks have felt the crush of tighter credit markets and the pressure of increased regulator scrutiny of their loan portfolios.
There are two interesting facts that we at CFO Solutions have discovered: the first is that Utah banks are in fact loaning money and the number of loans and amount loaned is increasing. The second is that, in many cases, the Utah companies that are successful in securing loans or renewals are not significantly more credit worthy than some of those that are facing denial.
How does this make sense and what is a business to do?
The answer lies in a company’s preparation and presentation. Today, the preparation for a successful loan is a lot more like preparing for an equity-financing event. The amount of advance preparation and the quality of the presentation will have a significant impact on the success of the project. Granted, a company that is not credit worthy will not be approved just because they have a well-organized business plan or a slick PowerPoint presentation for the bank. However, a business that may be on the borderline can significantly improve its chances of success if it is well prepared, has a complete and accurate financial package to present and tells it’s story well.
Part of the preparation is conducting your due diligence to clearly understand the types of credit that may be available to your company. You’ll also want to be familiar with the potential lenders in your space so that you clearly understand their underwriting criteria and can address concerns before they’re ever raised. If your business has suffered a setback, my philosophy is ‘the best defense is a good offense’ – explain the situation before the question is asked. Next, make sure that you have a strategic plan for your business, accurate historical financial statements and a solid forecast. In addition, it is essential that you educate yourself on current terms that the lenders are now demanding.
We have now helped several clients get to “Yes” when they had previously been told “No”. It takes time and discipline, but it is possible with the right preparation, relationships and presentation.
If you would like to know more about our services, please Contact UtahCFO for a free consultation.
—Kent Thomas, Founder