As economy improves, prepare to finance your growth

Every week, it seems, we’re seeing more indications that the long-awaited recovery is truly under way. The Dow Jones Industrial Average closed above 13,000 on February 28 for the first time in nearly four years. The S&P 500 has registered three consecutive monthly gains, the first time that has happened in a year. The national unemployment rate fell to 8.3 percent in January, its lowest mark since February 2009.
While these signs are positive, it’s quite obvious that the economy’s uphill climb won’t be anywhere near as rapid as its descent in 2008.
But the continuing good news should be prompting businesses to dust off plans for renovations or expansions and to start talking to bankers about how to finance them. Securing additional financing isn’t automatic, but here are some things you can do to better position your business to have its financing request approved.
■ Put together a complete package: Clearly explain the reasons for your financing request. Prepare business plan projections that show how additional financing will enable your business to grow. Present three years of financial records — tax returns, audits, financial statements. Prepare aging statements on accounts receivable and payable so your banker can see you’re keeping on top of your cash flow.
■ Have reasonable expectations: Allow appropriate time for the request to be considered, underwritten and approved; be prepared for requests for additional information
■ “Cash is king”: Ability to repay will weigh just as heavily as collateral in the decision process.
■ Demonstrate that you’re a good manager: If you have managed well during the downturn, your banker will be even more confident of your ability to manage well during the recovery. Show what you’ve done to reduce or control costs in the last couple of years: for example, reducing overtime, renegotiating insurance contracts, and/or limiting discretionary expenses.
(For more ideas, look here.)

Most of all, be sure to communicate regularly with your banker, even if you’re not quite ready to seek new financing. Make sure your banker knows how your business is doing. The stronger your relationship, the better your chances of success when you make your request for financing.