Youre not a good fit with our bank. We wish you the best of luck in finding a financial institution who can meet your needs.

How many times have you heard that from your friendly local banker? More times than you care to admit.

I recently spoke to a banker who put into perspective the difficult decisions made each day when evaluating new client lending relationships. The bank cant be wrong more than one out of every hundred dollars of loans. In other words, if bad loans climb above one percent of total loans outstanding, the bank begins to lose its credibility as a safe haven for deposits which are their lifeblood.

That doesnt leave much room for error.

Visit enough web sites with advice on how to borrow money from a bank and you can find about the five Cs of credit capacity, capital, collateral, character and conditions. Once youve mastered these basic criteria, are there additional things you can do to improve your likelihood of gaining admission to that select group of bankworthy borrowers?

The answer is YES!

• Get a plan: Having a business plan including pro-forma projections is a must! Use your projections on at least a quarterly basis to gauge trends in your marketplace and understand variances in your operating results.
• Cash is king: If youre not collecting your cash in a timely manner, the bank will assume you wont re-pay your loan in a timely manner. Revisit your credit, billing and collections policies and implement necessary changes to improve your cash flow. When you evaluate the profitability of a customer, consider how quickly you are able to collect your revenues. Selling to a big client isnt typically the right move if they wont pay you for 90 days.
• Diversify your client base: When any customer exceeds 10 percent of your total sales on a regular basis, its time to find some new customers. If customer concentration levels exceed certain thresholds, the bank will deem you to be at greater risk to your customers bankruptcies or contract defaults and may reduce your borrowing base.
• Know your collateral: Banks look for three sources of repayment cash flow, company assets and assets of the owners. Know what youve got and how much it is worth.
• Invest in people: First, make sure your business has more than one person capable of making big decisions. Second, assemble a diverse team of trusted outside advisors which meets regularly to make sure the business is on track and prepared for contingencies.
• Build good systems: Information is power! The ability to provide accurate and timely reports on receivables, inventory, payroll, payables, fixed assets and other areas is critical to proving you have control over your operations.
• Hire a good CPA: Hire a reputable accounting firm that represents clients that obtain the type of financing that you need. The more money you want to borrow, the higher the level of scrutiny your financial statements will receive.
• Focus on relationship: Banks are not simply interested in loans they want to provide you with a host of services. The more services you can utilize, the more valuable of a prospect you become.