The Lender of the Pack: How to Hunt for Business Loans Like an Alpha Dog

The search for a loan is a critical tactic in your business plan. There is a right way to secure business financing that will preserve your lending relationships, maximize your borrowing effectiveness and promote business growth. Be a more durable borrower by following these seven principles for finding loans.

  • Treat your lenders like life partners: Creating a close professional relationship may help you get better loan terms and pricing and may facilitate the credit approval process.
  • Design a compelling request for proposal (RFP): Invest time and money to produce a professional loan request that will represent you in front of the credit committee.
  • Get more than one loan bid: Competition establishes markets.
  • Maintain a current loan quote matrix: A spreadsheet will help you monitor the loan bid process and quickly compare quotes to select a winner.
  • Be discreet: Be a good borrowing partner and avoid shopping quotes to competing lenders.
  • Best and final or sharpen your pencil? Let all competing lenders know the ground rules for bidding.
  • Pick a winner quickly: Bids can go stale due to changes in credit market conditions or within a particular lender.

Finding new debt can be a rewarding experience. Your actions during the bid process will make all the difference in the current loan closing and future debt from your stable of lenders.

Posted in Borrowing, Business Borrowers, Uncategorized | Tagged ,

Leverage Bookkeeping To Work On Your Business, Not In Your Business

Today the typical business executive is overwhelmed with the demands to maintain accurate accounting records and produce timely financial reporting. Your time spent on entering, reviewing and publishing financial data is time lost for working ON the business. Would you like to spend less time working IN the business and more working ON growing your sales, revenue and customer base? How can you leverage other resources to free yourself from the chains of financial record keeping?

Would you like to…

  • Free your key employees to leverage their talent and grow sales?
  • Respond to financial trends faster and avoid strategic mistakes?

Your employees are one of the most valuable assets to drive sales growth. Their time is better spent working on the business, meeting customers and generating sales than sitting through budget meetings with disorganized financial data. Imagine the profit gains that could be made with time saved in budget meetings if you had a well-organized financial record keeping system. You could make better and faster business decisions using well constructed financial data.

You have worked hard to build your customer base. You are the captain of a ship looking toward the horizon for approaching danger. Modern ships have sophisticated electronics to detect changes in weather, ocean conditions and traffic. The captain takes early corrective action to avoid known hazards. Business leaders can navigate with greater confidence when they have complete and timely financial data to spot adverse trends within their industry and among their customers. Timely financial reporting can help you respond early to a bad trend in orders and retain a big customer.

Bookkeeping and accounting services, financial software, and your own record keeping efforts are the best tools for excellent financial reporting to capitalize on these business opportunities.

Why are you still doing your own financial record keeping and reporting?

Posted in Accounting and Bookkeeping, Uncategorized | Tagged , , , , , ,

Impress Your Lender With Organized Financial Reporting

Bookkeeping and accounting services exist for the sole purpose of working with financial records. Business executives and owners can leverage their expertise to promote a better business life. The great thing about organized financial records and professional financial statements is the positive effect they have on your financial stakeholders.

  • Your lender is eager to get regularly published financial information about your business.
  • They want the information in a clear, consistent and factual format.
  • Your lender can become more confident about your business risk profile and be a better advocate for your loan application when it passes before the bank credit committee.
  • When your bank is more comfortable with your financial condition they tend to call and visit less often.
  • Lenders get nervous and dig deeper when information is incomplete and delivered late.

When lenders describe your business as stable it can open opportunities. Bankers and investors seek out those prospects that are more creditworthy. This is especially true during financial crises when loan and investing underwriting gets tougher. Sometimes funding sources will call you to take their money because your financial records are complete and accurate which paints a great risk profile.

Clearly presented and accurate financial data can reduce your business risk profile.  Get professional bookkeeping and accounting help.  Why are you still doing your own financial record keeping?

Posted in Accounting and Bookkeeping, Borrowing | Tagged , , , , , , , , | 1 Comment

The Bookkeeper Bath: How to Clean Up Your Financial Records and Polish Your Business

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The business world runs on numbers. But not all businesspeople are great at collecting, storing, retrieving and publishing their financial figures. Each executive must decide what is best for their business. Either learn how to keep better financial records or hire someone to do it for you. Ignoring your financial records will come back to bite you at some point whether you are dealing with a funding source, the government or the legal system.

Organized financial records can help your business by:

  1. Clearly presented and accurate financial data can reduce your business risk profile.
  2. Debt and equity capital can become more accessible at better terms.
  3. Your CPA can be more accurate with your tax returns which may reduce your audit risk and lower your accounting fees.
  4. Business planning becomes more efficient with shorter financial forecasting meetings.
  5. Key employees have more time to leverage their talent and grow sales.
  6. And most importantly you can respond to financial trends faster and avoid strategic mistakes.

Bookkeeping and accounting services, financial software, and your own record keeping efforts are the best tools for excellent financial reporting to capitalize on these business opportunities.

Posted in Accounting and Bookkeeping | Tagged , , , | 4 Comments

How to Calculate the Net Present Value (NPV) of a Capital Investment

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How can you identify the most financially attractive investment? Make the right choice and your business will bloom with new revenue and added value. Make the wrong choice and you will spend years untangling from an unwise investment and incurring substantial financial losses.

You must do the math!  There are three primary ways to calculate an investment return.  We’ve already looked at ROI and IRR.

The easiest and most common method to evaluate a business investment is by calculating a static pro forma return on investment (ROI).  The pro forma return calculation looks at what will be when the investment is fully operational or stabilized.

The Internal Rate of Return (IRR) calculation takes into account the time value of money.  The IRR calculation takes a series of investment inflows and capital outflows and returns the average annual rate of return over the investment period to yield a zero net present value (NPV).

And a third method is net present value.

Net Present Value (NPV) is the cousin of IRR. The differences are with IRR you solve for the average annual return to get a zero NPV while the NPV calculation shows the value in today’s dollars from a series of future investment flows. You need to determine the annual discount rate to solve for the net present value for your investment opportunity. This involves substantial guesswork and is prone to error so be careful when selecting the discount rate to apply to future cash flows.

Choose carefully from among your investment options during your financial planning process. You have a finite amount of disposable cash for growth opportunities. Your strategic investment plan should include a calculation of return on investment (ROI), net present value (NPV), and internal rate of return (IRR) for each business opportunity.

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How To Calculate An Internal Rate of Return (IRR)

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There are three primary methods of evaluating the financial return of a capital investment. You can look at a static or pro forma return on investment (ROI), an internal rate of return (IRR) or the net present value (NPV) of an investment. Actually, you can use all three methods to have a more complete financial picture. There are other less useful but widely used methods to evaluate the return on an investment such as calculating the payback period.

The Internal Rate of Return (IRR) calculation takes into account the time value of money. As mentioned above, time value of money is a financial principle that a dollar today is worth more than a dollar tomorrow due to expected or realized inflation. In other words the longer you have to wait for an investment to return a dollar the less it is worth to you today. The IRR calculation takes a series of investment inflows and capital outflows and returns the average annual rate of return over the investment period to yield a zero net present value (NPV).

For example, an investment that has a ten-year time horizon might return a 10% IRR which is the average annual return of the investment. Some years the return will be higher and some years it will be lower. IRR is useful for comparing strategic investments that have the same time horizon but different planned cash flow streams. It also provides clarity because it discounts future cash flow.

Choose carefully from among your investment options during your financial planning process. You have a finite amount of disposable cash for growth opportunities. Your strategic investment plan should include a calculation of return on investment (ROI), net present value (NPV), and internal rate of return (IRR) for each business opportunity.

Posted in Decision Making, Due Diligence, Executive Coaching, Finance, Management Consulting, Strategic Planning | Tagged , , , , , , , | 1 Comment

How to Calculate a Capital Investment Return (ROI)

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You have a plan to strategically invest your business capital. You want growth in sales and value for your company and you have identified one or more opportunities to deploy your company’s cash and accomplish your business objectives. How can you identify the most financially attractive investment?

The easiest and most common method to evaluate a business investment is by calculating a static pro forma return on investment (ROI). The word pro forma comes from the sixteenth century Latin word meaning as a matter of form. The pro forma return calculation looks at what will be when the investment is fully operational or stabilized. This calculation ignores the planned ramp up period for the strategic investment but takes into account any operating capacity slack at stabilization.

Time value of money is not a consideration in the pro forma ROI calculation. In other words, if it takes several years after you make the investment to begin generating profit there is no discount for the delay in investment return. Time value of money is a financial principle that a dollar today is worth more than a dollar tomorrow due to expected or realized inflation. To calculate a static ROI simply take the expected stabilized net operating income divided by the expected costs to acquire and improve the investment. You can evaluate competing capital investment opportunities using ROI because all the calculations are made using dollars at today’s value.

Make the right investment choice and your business will bloom with new revenue and added value. Make the wrong choice and you will spend years untangling from an unwise investment and incurring substantial financial losses.

Posted in Executive Coaching, Finance, Management Consulting, Strategic Planning | Tagged , , , | 3 Comments