The Funding Dilemma: Navigating the Rules of Finance

Andrew Mattner • April 8, 2024

As a seasoned business advisor, I often find myself repeating a frustrating truth to entrepreneurs seeking financial support: the banks operate by two unwavering rules.


Firstly, when you're in desperate need of funds, they're typically out of reach. Secondly, when your business is thriving and you don't require financing, suddenly, it's readily available in abundance. This paradoxical situation can be immensely challenging for business owners striving to manage and expand their enterprises efficiently.

Overcoming the Banker's Rules: Strategies for Success


1. Diversify Your Banking Relationships

One crucial strategy is not putting all your eggs in one basket. It's imperative to cultivate multiple relationships with various financiers. By spreading your banking needs across different institutions and even different types of financing, you decrease reliance on any single source.


2. Maintain Excellent Financial Data

Financial health isn't just about the numbers; it's about the quality and timeliness of your data:

  • Timeliness: Adopt cloud-based accounting systems for real-time financial reporting. Monthly reports delivered months after the fact are no longer acceptable.
  • Tax Compliance: Ensure your tax returns are up-to-date and filed promptly.
  • Three-Way Budgets: Develop comprehensive budgets that include profit projections, balance sheets, and cash flow forecasts.

3. Be Proactive and Prepared

Understanding your business's performance and cash flow cycles is vital. Be ready to update financiers on your business's health at any time. Recognize potential issues early and communicate them to your financiers well in advance of needing additional funds.


4. Manage Tax Debt

Tax debts can raise red flags for financiers. Stay on top of your obligations to maintain a positive financial reputation.


5. Present Clear Business and Strategic Plans

Demonstrate to your financiers that you have a clear vision and strategy for your business's future. They need to understand and buy into your goals.


6. Accuracy Matters

When seeking funding, ensure your financial modeling is accurate and realistic. Overly optimistic projections can raise suspicions about the need for funds, while overly conservative estimates may indicate excessive risk. Strive for credibility and transparency in all financial dealings.



Conclusion

Navigating the world of business financing requires proactive and strategic planning. By adhering to these principles and actively managing your financial relationships and data, you can position your business for success even within the confines of the banker's rules. Remember, it's not just about needing the money; it's about being prepared to access it when the time is right.

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