Unless you are operating a cash rich business, at some time all businesses will need to borrow money from the bank. This can be as simple as having a company credit card, or as complex as building or equipment acquisitions.
The banks have criteria (rules) they want you to operate within for any money they lend to you. Keeping track of these rules, what the rules mean and all of the reporting that must take place can be overwhelming. We will be your connection with the bank and ensure that relationship is working for you. After all, the last thing you want is to be working on fulfilling a major order and have the bank cut your line of credit because you did not meet one of their criteria.
Many common borrowing requirements require:
- Minimum bank balances.
- Debt to equity ratios - The bank wants at least a minimum portion of the money invested to be owner's money.
- Purchasing restrictions - As it is their money, especially for a line of credit, they want limits on what it is spent on.
- Interest ratios - The amount of money paid in interest overall cannot exceed a certain amount.
- Working capital ratios - This is a measure of the businesses ability to pay all of its bills and lease payments that are due within the next year.
- Debt service ratio - The cash generated from operations must be sufficient to repay the bank.