Banking
Effective relationships with banks start with a honest assessment of banks. Banks are not your friends, they are not your partners and they are not your trusted advisors. But, they are not your enemies, either. Banks are suppliers of money.
In the capitalist system banks are primary allocators of capital. Therefore, judged by the success of the capitalist system, banks have largely allocated capital wisely. Depositors lend money to banks as an act of faith in banks' integrity and ability to safeguard their money; therefore, the safety of depositors' money is the highest priority of every consistently successful bank. Shareholders buy bank shares with a view to moderate capital appreciation and moderate risk. Therefore, income and appreciation in bank shares is the next highest banking priority. Borrowers gain efficiencies. Accessing the banks' pool of money for a $10,000,000 capital expenditure is far easier than attracting $10,000 each from 1,000 individuals.
Rule # 2: Be Profitable
Banks lend money to companies that can pay them back.
Rule # 8: Be Honest And Forthright
Telephone every two or three months. Fax favorable press coverage. Enclose with the financial statements a two page summary of the company's progress. If a problem occurs, such as non-payment of a large account receivable, promptly explain the problem and what management plans to do. A company can make mistakes, survive an unprofitable year and recover from a major account receivable that becomes uncollectible. A company cannot recover from a loss of reputation due to dishonest behavior (unless senior management is replaced).
Resources
Strategy & Business Planning of Privately Held Companies
Effective relationships with banks start with a honest assessment of banks. Banks are not your friends, they are not your partners and they are not your trusted advisors. But, they are not your enemies, either. Banks are suppliers of money.
In the capitalist system banks are primary allocators of capital. Therefore, judged by the success of the capitalist system, banks have largely allocated capital wisely. Depositors lend money to banks as an act of faith in banks' integrity and ability to safeguard their money; therefore, the safety of depositors' money is the highest priority of every consistently successful bank. Shareholders buy bank shares with a view to moderate capital appreciation and moderate risk. Therefore, income and appreciation in bank shares is the next highest banking priority. Borrowers gain efficiencies. Accessing the banks' pool of money for a $10,000,000 capital expenditure is far easier than attracting $10,000 each from 1,000 individuals.
Rule # 2: Be Profitable
Banks lend money to companies that can pay them back.
Rule # 8: Be Honest And Forthright
Telephone every two or three months. Fax favorable press coverage. Enclose with the financial statements a two page summary of the company's progress. If a problem occurs, such as non-payment of a large account receivable, promptly explain the problem and what management plans to do. A company can make mistakes, survive an unprofitable year and recover from a major account receivable that becomes uncollectible. A company cannot recover from a loss of reputation due to dishonest behavior (unless senior management is replaced).
Resources
Strategy & Business Planning of Privately Held Companies
MCCA - McCann Corporate Consulting Associates
MCCA is a consulting firm established in 1989 to assist companies and not-for-profit organizations under-performing to the expectations of their executives, shareholders, lenders and stakeholders.