No matter what bankers say, the first thing bankers look at is the annual profit shown on your financial statements. This is the benchmark of your success in their mind. In the mind of the typical banker, "Nice profit equals smart business person, low profit equals dumb business person." No amount of explaining can undo the damage a poor profit figure does to you image as a successful company-builder. Get your profit as high as you can before you meet with the bank.
For example, you are taking home a salary of $125,000 when $75,000 is more in line with what other owners of similar-size companies in you industry are making. More power to you, but if you add this $50,000 of "excess" compensation back into profits, your bottom line is going to look a whole lot better.
If all this sounds suspiciously like keeping two sets of books or like a lot of work, relax. It's perfectly legal since all your income is being reported. You are just showing what happens if you move income and expenses around on paper. As for the work involved, all that is usually required is making a few adjustments on the expense side of the ledger.
After you have recast your earnings to put your historical financials in the best possible light, it's time to look to the future. What are you giving your banker that show him or her what is going to happen to the company's finances over the next three to five years? What are you giving the bank to show how you are going to use their money, other than vague references to needing working capital? Probably nothing, if you are like the majority of company owners.
No comments:
Post a Comment