What Your Banker Doesn’t Know CAN Hurt You

This is an article from the Bank’s financial education series Connections: Life & Money

As a business owner, how vital is it to you to have quick access to capital when you need it the most?  Most banks offer products designed to meet the needs of a situation caused by a short term cash shortage, however, not all bankers have the expertise to recognize which product is the right solution.  Not knowing the difference between the two can put your business in a precarious financial situation at the worst possible time.  Having open communication with a banker that understands how your business operates can provide your business with an important partner that can help your company avoid certain pitfalls.

Take Time to Build a Relationship Before the Need is Now

We live in a fast paced society that demands quick turn-around times, instant access, and convenience at all times.  Often times, in this environment, proper decision making and helpful advice take a back seat to speed.  I have worked within the banking sector of the financial services industry for the past 14 years and I have seen on numerous occasions the negative outcome that is created from this mindset.  Often working 70+ hours a week, with limited time for family and friends, I can understand why it is tempting for business owners to take the easiest and quickest solution that comes along with expediency.  Quite frankly, a lot of business owners don’t have enough time to do the research it takes to make the most informed decision and/or the resources to hire someone who can add value in this way.  Most often, the burden falls upon them along with all of the other important decisions presented to them every day.  From a lending standpoint, one of the most common mistakes I see a business owner make is financing a longer term asset on a short term credit facility.  To simplify, this means buying equipment, real estate, automobiles, and many other various items by using a credit card or a line of credit.  Often times, this is done because it is the quickest and easiest way to do it.  Using a credit card helps the business owner avoid getting a separate loan and the possibility of paying more loan fees.  Unfortunately what this also does is to take away a very important instrument that they had before they used it which is quick access to capital in an emergency situation.

What Does the CPA Say?

I always strongly recommend that a business owner interview and hire a CPA that will be proactive in offering them business advice from a tax perspective.  A good CPA can help to counsel the business owner on the harmful effects to their company’s balance sheet if credit is used in this way.

Take the Time to Align the Right Professionals with Your Business

In conclusion, as a small business owner, you want to ask yourself, “Have I aligned myself with the right kind of partners that will offer me advice that is in the best interest of my company”?  A true partner should be willing to meet with your other business advisors, as well, to help ensure that everyone is working together to help accomplish the goals that you have set for your business.

Contact the Mars Bank commercial lending team at 724-625-1555.

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