Many business owners look at their profit and loss statement and determine if they're profitable or not. How is revenue tracking against last month or last year? Any changes in gross or net profit margin? If I'm making money then everything must be ok. There is some validity to that way of thinking.
Two things have become increasingly apparent to me. If you're a big company, you have good access to capital and can find the funding needed to finance your business. Small companies don't have that access to capital and finding funding is difficult. Here's why:
Businesses that took out debt a year ago or even 3 years ago may find themselves in a situation where the cash flow used for the loan or the purpose of the loan has changed. Many businesses find themselves in a situation where a refinance makes sense because they either want to reduce their loan payments to use cash flow for growth or they may want to increase the loan amount because their business is expanding. Businesses are dynamic, but a loan repayment is usually static due to the fixed term of the loan. A floating rate loan is the exception.
Securing financing for your business can be challenging. Whether you're borrowing money for the first time to start your business or you're looking for a loan to grow, the lending criteria banks use can be rigorous. It's important to know what are the must haves that a bank is looking for to approve your loan. Here are the top 4: