By Sandra Taylor-Sawyer: Local columnist
Most of us remember with fondness the lovable small-town lender played by Jimmy Stewart in the movie, “It’s A Wonderful Life.” But in real life many small business people become intimidated by transactions with the financial community. The mergers, consolidations, bank closures, staff transfers and government bailouts have added to this feeling.
At the Small Business Development Center, we often have occasion to meet and talk with local bankers. Without exception they have always shown their support of our efforts to aid small business owners through their participation in the activities and workshops we sponsor. We are happy to report that up close they are neither intimidating nor impersonal in any manner, but rather are very human, personable and professional.
It is helpful for the small business owner to keep in mind what bankers are all about, where they are coming from, and what they are really looking for when considering loaning money. It is the bankers fiduciary duty to perform a “due diligence investigation” before approving a loan or a line of credit to anyone. Bankers and other lending agencies look for the owner to have a strategic business plan, possess the necessary experience, and to have the required facilities to generate sufficient cash flow to repay a loan.
Bankers want to know what sales were over the last three to five years. This helps as it shows the growth rate and possible earning potential of the business. The cost of sales, which is known as cost of goods sold, along with expenses and cash position demonstrate financially how the business can survive.