Business Loan Hunting … You Want to Win or You Want To Lose?
By Eugene E. Valdez AKA the Loan Doctor™
The Loan Doctor has a pleasant bedside manner and likes to dispense business health tips. So hang on.
Everybody knows to be a healthy company CEOs need sufficient capital, be it their own (equity) or somebody else’s, (debt). Most CEOs after initially starting their business opt for debt since they don’t have more personal cash just lying around that they can invest into their company for a second time. Further, they don’t want to sell any stake in their companies by bringing in private investors because they want to retain 100% management control. That being said the market for business loans is huge.
Most CEOS who have hired me as a consultant to help them obtain financing have been suffering from a destructive, pervasive disease. In my consulting practice this disease is the number one reason why my clients have not been successful in obtaining competitively priced business loans before they hired me. The shocking thing is that my clients were not even aware that they had this disease until I brought it to their attention.
What is this disease? The Disease of Poor Internal & External Accounting/Financial Statements!
During the last 6-9 months I have worked with several clients:
- Retailer Storage Units – $5,000,000 term loan
- Contractor- $750,000 LOC
- TI Contractor- $2,500,000 LOC
- Retailer Promotional Products- $150,000 term loan
- Food Mfg- $600,000 LOC
- Construction Contractor- $1,800,000 LOC
#1- Never made it to the finish line, negative accounting issues scared off lenders.
#2- Loan approved after accounting errors were fixed.
#3- Loan approved after CPA statements were restated.
#4 -Loan approved after adjustments were made cash versus accrual basis of accounting.
#5- LOI issued after adjustments were made to historical P & L, backed up my projections.
#6- Issuance of LOI stalled until errors in CPA financials and Business Tax Returns are corrected.
I didn’t fix the negative accounting issues myself, I just identified them. The CEOs corrected the errors by working closer with their current accounting staff or hired new professionals to do the job.
So if you want to win at the money game stop shooting yourself in the foot!
Create an awesome internal accounting department by carefully selecting your software, hiring intelligent accounting staff and seeing to it that they are properly trained continuously.
Hire a competent outside CPA, not an “enrolled agent” or “glorified bookkeeper.” Research what GAP means and learn the basics of reviewing your own financials. Learn the difference between cash and accrual basis of accounting.
You can stop this deadly business disease in its tracks by recognizing how destructive it is and your willingness to spend money.
Do not think of the costs of your accounting systems (internal & external) as an expense but as an investment in the value of your business over time.
You might say, “Hey Doc all this accounting stuff you mentioned is what “big companies need,” I am just a small business owner.” And you would be wrong. “The little guy” needs it even more. The little guy needs spot on accounting to monitor how they are doing, to stay viable over a long period of time and to obtain expansion business loans, the theme of this article.
Eugene E. Valdez is President and CEO of The Loan Doctor and Associates, Inc., a full service banking and finance consulting company located in Upland, CA. He can be reached at 909-230-0024. Like and follow him on social media Facebook, LinkedIn.