How is your Business Borrowing Fitness?

The Olympic Flag flying in Victoria, British C...

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The business borrowing process looks like an Olympic bar bell.  One end is heavily weighted with borrowing preparation and the other end with servicing the loan after closing.  Lift these correctly and you will have a successful borrowing experience.  Lift them the wrong way and you could be in for some borrowing pain during the loan term.

Develop a Solid Capital Plan
Capital planning must be firmly grounded in reality.  What is the purpose for borrowing?  Will the new debt give you positive leverage?  Will existing cash flow cover the new debt service?  These questions must be answered in a thorough capital planning process before the first conversation with any lender happens.  For existing businesses the historical financial statements and the annual budget form the basis for the debt coverage calculations.  Check your industry leverage and debt coverage ratios if possible.  U.S. publicly traded companies are required to file financial reports with the Securities and Exchange Commission.  You can get some idea of where your business financing condition stands relative to these large companies.  They may disclose the interest rate and other terms for new loans which can give an idea of the lending market for your industry.

This is just one of the ways you can get your business into top borrowing condition.  Leverage can be a powerful business tool if used smartly and with a sound purpose.  The durability of your business depends on getting the borrowing process right.


About Michael Shelton

Your Business Coach Facilitating Delegation and Work Group Engagement Michael Shelton has over twenty-five years of business and military accomplishments, including extensive experience with one of the largest, publicly traded real estate investment trusts (REIT). He is a qualified business coach with assignments in cross-functional work group management, strategic planning, unit leadership, joint venture acquisitions, executive education, mentoring, training and merger integration. Michael has accumulated best practices for building committed work groups from more than $4 billion of capital markets transactions and commercial property development. He served as a commissioned officer and helicopter pilot in the U.S. Army, and earned his MBA from The University of Arizona. Michael has served as a major conference panelist and is the author of Cash Flow Rich, Winning Ways to Evaluate and Finance Real Estate. Today, he helps business owners get more work group engagement as President and CEO of Shelton Business Services, LLC in Scottsdale, Arizona. Disclaimer: I don't offer investment, legal or tax advice. Talk to your broker, accountant or lawyer for investment, tax and legal help. I might own stock in the companies I mention on-line. My posts, tweets and other on-line activity are my personal thoughts and don't represent my employer or company.
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1 Response to How is your Business Borrowing Fitness?

  1. Pingback: How is Your Financial Teeter Totter? Understanding Business Leverage Ratios | Borrowing Money: Your Handy Guide

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