When is the best time for a small business to seek financing?
by Debi Enders
It might sound counterintuitive, but the best time to apply for a loan or line of credit is when you don’t actually need one.
If you wait until you’re in a cash crunch to approach your banker, it’s harder to get a loan. Cash flow is one of the first things lenders consider when gauging a business’s health. To obtain financing, you need to demonstrate your ability to repay.
The good news is that it’s often possible to predict cash flow gaps and map out a timetable for making major purchases. Your accountant can help you with this. You can then be proactive in talking with your banker about financing options that will enable you to navigate bumps in the road without jeopardizing your business’s long-term health.
How often should you meet with your accountant and banker to discuss these issues? There is no one-size-fits-all answer. Annually is fine for some. But if your business is going through rapid changes or you are planning something big – the purchase of a building, for example – you may want to meet more frequently.
What if you’re already facing cash flow challenges? Don’t put off talking with your banker a minute longer. The sooner you share what’s going on, the better your chances of finding a way out of your current situation.
In other words, talk with your banker and accountant – in good times and bad. It will help you build better relationships with both. And that’s always a good thing.
Debi Enders (debi.enders@commercebank.com) is vice president, small business banking at Commerce Bank.