Managing Cash Flow and Working Effectively with Banks, Part 3

Image courtesy of

This is an excerpt from a presentation I give to business owners about managing cash flow and working effectively with banks.


In this part, I want to shift into a discussion of working effectively with banks. Here are six things I’ve learned through the years in seeing clients try — usually unsuccessfully — to get loans from banks.

One: There will be a lot of paperwork and questions

Yes, the paperwork and questions are annoying. Some would even say it’s invasive. I agree. But … if you’re asking a bank for money, the simple fact is that there is going to be a lot of paperwork, and there’s nothing you can do to change that fact.

Two: The bank will look at your personal credit, even if you’re a corporation

I’ve never had a corporate client get financing based on corporate credit alone. In all cases, the owner(s) are listed as co-signers on the loan. This means, getting back to item #1 on this list, you’ll probably have to answer questions about your personal finances in addition to your business finances.

Three: It’s vital that you have a down payment

If you don’t have at least 20% to put down, I would offer the following gentle suggestion: don’t waste your time or the bank’s time pursuing the loan. If you don’t have a down payment, they’re not going to lend to you.

Four: How you present yourself matters — make an appointment

This list was originally five items long. Then I talked to a banker who’s a friend and a client, and I ended up adding “make an appointment” to the list. My friend/client who’s a business banker said he can’t think of a single time when a business owner just walked in off the street and the deal ended up working out. Call ahead, make an appointment, be on time and be prepared for your meeting with the bank.

Five: It’s good to be enthusiastic about your business, but don’t oversell — the banker is not a customer of yours

I once had a client who asked me to attend a meeting with a loan officer for a loan the client’s corporation was trying to get. My client spent nearly an hour bragging about his business, going on and on about how great his business was, and essentially treating the banker as a prospective customer. The loan ended up falling through in part because the bank had concerns about cash flow. In other words, all the enthusiastic sales pitches in the world won’t change the fact that the bank wants to know your bottom line more than anything.

Which leads to the most-important item on this list:

Six: Banks care the most about … getting paid back

If you forget everything else on this list, #6 is the one thing that’s important to remember. You need to be able to demonstrate not just that you have a down payment or that you have good credit and a good business plan … but also that your business is profitable. Banks want to see a healthy business that can afford the loan payments, because ultimately the bank care most about getting paid back.


Other parts in this series:

  1. Part 1: Definition of “cash flow”
  2. Part 2: Budgeting and how it relates to cash flow