Monday, March 26, 2007

You Better Do This!

For a small business that has never before borrowed money in a significant way, it may come as a shock. But once you've outgrown the small, unsecured line of credit from the bank as a means of funding your business, you'll have to make some changes in how you run your business.

In this month's edition of Hispanic Business Magazine, Manuel Henriquez of Hercules Technology Partners says if you're bringing in outside investors (debt or equity), you need to develop a new discipline and rigor with respect to your financial record keeping and controls. Once you entertain financing from an outside investor, they will send in their accountants and auditors to confirm the accuracy and validity of your revenues and expenses. You'll also need to produce financial reports on a timely basis on accounts receivable, accounts payable, operating results and borrowing needs just to name a few.

Any hiccups in those numbers or your systems and it's "hasta la vista, baby"!

I'm currently working with a client facing this situation. They have been fortunate enough to have enjoyed tremendous growth that has outpaced their ability to fund their business without outsiders. To become the $100 million revenue company they envision, they are upgrading their skills, systems and controls to provide comfort to a funding source that the company can produce accurate and timely reports in support of the business loan.

If you intend to seek a lender or an investor in the future, make sure you know today what you will need in place with regards to financial reporting and control requirements. Find out if your lender will accept internal Quickbooks reports or if they'll need CPA prepared statements (compiled, reviewed or audited) as a condition of providing you with financing.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call.

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