Going for Bank Financing
Whether this is your first time going for bank financing or you’ve done it many times in the past, today’s environment for financing is very challenging. The rules have changed. Bank regulators facing large numbers of bank failures in recent years have tightened down on bank lending practices. As a result, banks have tighter limits on what they will lend upon and the terms of such lending. In addition, loan covenants used by the banks to monitor a borrower’s operations and control activities that will weaken the bank’s position are being used extensively now. In the past, if your business failed to meet a loan covenant, you just asked your bank for a waiver and in most cases the bank agreed. Those days are gone.
It is during these Change Moments that the support of a strong CPA advisor who understands bank financing can be helpful. Understanding what your business can afford to borrow is the first item you and your CPA should discuss. It’s important to make sure you aren’t taking on more debt than your company can handle. How will the loan affect cash? What happens during a slow economy? Will you still be able to handle the debt?
And as time goes on, it’s important to monitor your ability to continually meet your debt obligations on a proactive basis when there is still time to make needed changes. Here again, your CPA can help.
As specialists serving small and mid-size closely-held businesses, Dugan & Lopatka has worked with thousands of companies on bank financing. Please visit our Loan Covenant Monitoring services to see how we can help you.