What If It Disappeared?

In my last blog, I suggested that there were many good reasons to measure the Cash Flow of your business on a regular basis. I stated that if you measure it, you can understand it. If you understand it, you can gain control over it and then make improvements where they are needed. I also pointed out that, even in challenging times, although it can be tough to look at, knowing your current position and then being able to make positive changes, is always better.

Finally, if your banker asks for a current update, having this information can position you to help them understand how you are doing, and, if necessary, look at ways to assist you with potential adjustments to your financing. Even more significantly, what if he or she cannot assist you when you need it? You may need to seek other financing sources or even change banks… Doing so with a firm grasp of your finances will always be superior.

Let’s take that one step further. What if banks, in general, decided to not finance your industry? If we look at a lot of agricultural financing and how it has changed over the last 10 years, one point really stands out. While there may have been 50 lenders offering financing through lines of credit and real estate loans 10 years ago, today these loan instruments might only be available from various Farm Credit offices and 10 commercial banks. What if some of them also exited, as have some very large banks?

If this ever occurs, several items become even more crucial to your success:

• Having solid CPA prepared Financial Statements for your business will be essential.
• Understanding your ongoing Cash Flows will keep your business on track.
• Knowing your Break-Even levels of your selling prices, your costs & your production levels will be absolutely needed to successfully implement a sound “Hedging Program.” This is becoming increasingly scrutinized by lenders when they are looking at loan repayment capacity. In essence, they want some assurance that their loan will be repaid, as agreed.

Do you have a contingency plan for your future financing? Even if you are happy with your current lender, it still pays to visit with alternative sources of money, because you never know when you may need them. Besides, nothing improves a bank’s performance more than being faced with a little competition…

“The world has the habit of making room for the man whose words and actions show that he knows where is going.”

Napoleon Hill

Let’s take your business to the Next Level!