What kind of advice, beyond things like loans or checking accounts, can a banker offer?
As an adviser, a banker is a great resource for exploring alternative investment avenues, learning ways to manage cash or talking about retirement plans.
Whether it is with FirstMerit or any other bank, your banker should be your confidant. He or she should know more about your business than anyone else in the world except you.
Bankers have the experience and the access to measurements that can determine whether your business condition is typical or normal. It’s like going to the doctor when your arm hurts: If you do not know if a sore arm is normal, how are you going to be able to take care of it properly? Financial metrics are similar, so you need expert advice.
Finally, bankers often have links to other resources, like the SBA (Small Business Administration) that can provide additional assistance. Banks like ours should be service-driven organizations, so use their resources.
How can businesses fund cash shortfalls?
Shortfalls can be filled from three sources, depending on the amount of the shortfall and expected duration.
First, the bank can help fill the gap, provided there is sufficient collateral from either the working capital assets or possibly excess value in fixed assets. Second, there are mezzanine providers that can provide bridge financing on a short-term basis to get the company through the cash crunch. Finally, the owner may be required to provide personal liquidity to meet the needs of the business.
Where can businesses turn for help?
If you need help calculating your cash flow, you should meet with your accounting or banking advisers, any of whom should be willing to provide assistance. A rolling six-month cash projection that effectively encompasses a company’s cash cycle is an exceptional tool for this type of planning.
Once a company has the information from its cash flow projections, it should meet with its banker and develop a plan to fund a projected liquidity shortfall if one exists. Banks are best able to help in these situations when all of the potential factors are identified and brought forward, giving all parties full knowledge of a situation. Surprises are a worst enemy for both client and bank. A company’s foresight in this regard exhibits management maturity and planning abilities. The time to do this is now.
Wendy Bolas is a business banking manager for FirstMerit Bank. Reach her at (330) 996-8061 or [email protected].
