Being in the banking world for any amount of time particularly in coping with company clients, you will hear the buzzword, 'cash flow lending' a lot. Of meaning, this word does not hold a lot for Suzy or the average Joe on the street and for non company owners that is true. But when the time comes to get a business loan, this word becomes all the more vital that you perceive for / or principals and business owners equally for several reasons.
Cash flow giving is the bread and butter of every bank when it comes to making prosperous and sound business loans. Think of it: would you give cash to anyone (besides family which is a gift in place of a loan more times than not) that doesn't have a means and/or manner of refunding? Common sense, right? Obviously you'dn't!!! Why should it be any different for banks lending to consumers or businesses? Rather than focusing on if and why banks are not lending to companies, the accurate and challenging question is: what evidence can the company disclose to convince the bank that it's a worthy candidate for the loan in the first place?
In a previous post, I emphasized the fact that banks are in the business of making money, and that companies should not get that loan when there's negative or non-existent cash flow. Common sense again, right? That is where the slant gets a little rough especially for start ups. Here's a tough lesson that each start up must learn: no bank in their right mind will risk any capital investment with no evidence of a cash flow stream that is energetic and healthy. Although a bank would entertain a business loan request in lieu of having an owner with a powerful (and liquid) net worth and powerful income, the deal in essence becomes a 'personal loan'. More information you can found at http://pointfinance.net/
What are the alternatives for individuals with negative or non existent cash flow and businesses like start ups? The age old answer of figure it out. What do I mean here? For one, help it become marginal and someone has to take the risk of failure. Why should a bank let alone anyone apart from the owner or principal take on this challenge? Call it a proving ground if you will, but the threat of failure must be mitigated considerably before a bank will entertain a company request. So that you can figure it out, first review the business's mission, vision, and objectives. Afterward, examine and assess finances and the operations of the company starting with the sales cycle, next appearance at the creation cycle, and last but not least, give an honest look over for weaknesses or inefficiencies to management.
The income cycle in any company is a path of revelation and discovery. Company is significantly more than setting up shop, selling widgets, and paying the light bill; than any school publication or entrepreneurial course will ever acknowledge it is unclear and more complicated. Company is about relationships and the handling of relationships… Both internally and externally. You will know when you have 'figured out' the game of company when you have a healthy and powerful income and relationships have stabilized to the stage of marginalizing doubt to a level satisfactory to the owners and/or principals.