Wednesday, July 08, 2009

Clean Up the Balance Sheet

Seven Steps to Improving Cash Flow and Profitability in a Turnaround is one of the articles in the most current edition of the CapitalEyes e-Newsletter from Bank of America Business Capital.

Clean up the balance sheet is the step which caught my eye.

Businesses are encouraged to generate as much liquidity as possible from receivables and inventories. Why? Money tied up in working capital is money not available to grow the company.

All lenders are focused on borrower liquidity in this market. Lenders want to know that borrowers are sending out invoices in a timely manner, if you are taking appropriate steps to implement leading edge credit and collection policies and if you are collecting your accounts receivable in a timely manner. Watch your receivables like a hawk!

Inventory is another hot button. Fewer lenders are willing to advance funds against inventory which may be slow moving or obsolete. I am finding that overly aggressive lending against inventory by incumbent lenders is one of the key reasons that borrowers are unable to find new lenders when the bank says "go"! More conservative lenders are limiting inventory advances to only 25-33% of the accounts receivable advance and only for profitable borrowers.

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

Tags : accounts receivable , Bank of America , CapitalEyes , working capital , business loans

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