Notes Payable and Long Term Debt (2 of 3): The Banking Relationship - John M. Leask II CPA/ABV, CVA

Notes Payable and Long Term Debt

Part 2 of a 3 part series

Warning Signs:

    • Increasing net sales to net working capital.
    • Rising net fixed assets to tangible net worth ratios.
    • Rising debt to tangible net worth ratios.
    • Difficulty borrowing funds.

Steps to Improve: THE BANKING RELATIONSHIP

  • Watch out for unsound banks.
  • Be sure the company’s major banks are financially strong.
  • Level with your banker about financial problems.
  • Draw up contingency plans.
  • Don’t surprise your banker with bad news; do surprise your banker with good news.
  • Use spare cash to pay down lines of credit.
  • Exercise dormant lines of credit.
  • Refinance or pay off loans when it will trim interest costs.
  • Refinance loans when it will increase cash flow at reasonable cost.
  • Be sure the bank you use is offering you competitive terms.
  • Be sure you are receiving the most favorable financing available.

Back to The Business Doctor

>>Notes Payable and Long Term Debt (1 of 3): Plan Your Borrowing
>>Notes Payable and Long Term Debt (2 of 3): The Banking Relationship
>>Notes Payable and Long Term Debt (3 of 3): Stretching Your Cash / Minimizing Borrowing