Small Business Tax Center
Small Business Ideas, Grants &
Plans to Start & Run a Business:

Small Business Grants
Network in Cyberschmooz Community Ask Questions Questions and Answers Share Tips Small Business Ideas List Your Business Business Advice from Idea Cafe Experts Coffee Talk with Experts Starting A Business Business Plan Biz Planning | Sample Plans Small Business Ideas Idea Name Your Biz Name Plan Your Biz Plan Financing $ Starting a Business Do It! Running your Business Marketing Tips Promotional Merchandise Marketing Tips Marketing | Sales | Customers Human Resources HR | Employees | Contractors Legal Forms & Tax Information Legal | Biz Forms Managing a Business Managing | Operations
Financing Resources Financing Your Business E Commerce & Webhosting eCommerce Take Out Info Trade Publications FREE Trade Publications Business Books Biz Books Your Own Business Small Business News Small Biz News Gen X Biz Gen X Biz Work at Home Work @ Home Business Information The Fridge - Biz Info on Ice Destress Send Awards Send Awards & Greetings Yoga At Your Desk Yoga @ Your Desk Fun Guide Guide to Find FUN Online About Idea Cafe Press Idea Cafe has received Idea Cafe in the News Idea Cafe's Kudos Kudos for Idea Cafe Advertise on Idea Cafe Advertise on Idea Cafe Privacy Policy Privacy Policy Contact Idea Cafe Contact Idea Cafe Link to Idea Cafe Link to/from Idea Cafe Join Idea Cafe
Search Idea Cafe Site Directory Site Map Online directory to business resources Biz Web Guide

Answer from our Guest Expert Peter Hupalo of Hupalo Ltd.


Stay on Mr. Potter's "Good" Side

With this said, preserve the relationship with your banker. Asking if he's "ever had an original thought for that matter?" is probably not the best question to ask him. (Though it's okay to ask us!) Instead, ask your "Mr. Potter" what you can do to improve your chances of getting the loan next year. You already alluded to your current debt position. If it's seasonal, pay it down and show a stronger financial statement next time. Sure, next season, you'll run up the line of credit again, but don't worry about that. That's a different kind of borrowing! Contemplate what time of year is the best for you to seek a loan.

The banker also mentioned your tax return loss and a fear that you might not have the cash flow to pay down the new loan. Here's a clear indication of what's bothering your Mr. Potter. He's expressing his concerns, so get in his good graces by listening well to what he's saying. You can address these dollar dilemmas next time around. Always listen to what you're being told directly or indirectly by those you do business with since it allows you to better understand their concerns. Sometimes, just addressing those concerns will get what you want the second time around.

What Banks Crave

Remember, character is one ingredient banks use when making lending decisions. So, don't say with a wink, "I want to show a loss to the IRS, but I'm really doing quite well. I'm actually making money. Trust me." That usually doesn't go over too well. In the absence of audited financial statements, tax returns are the main stay for evaluating your business' financial strength.

For example, bankers are taught from birth about the Interest Coverage Ratio or Times Interest Earned Ratio. That's the ratio of earnings before interest and taxes (EBIT) divided by interest expense. It's a good measure of how far earnings can fall before a company will have trouble paying interest on its debt. If you're running at a loss, it will throw up a red flag -- that is, the possibility of you not being able to repay the loan or even cover the interest payments. Also, figure how this ratio looks with all your available credit lines maxed out. And some banks go beyond this, and do far more advanced survivability analyses, where a computer runs scenarios to see if your business can survive. Mr. Potter has become more automated and even less personal. Other banks will rely more upon the personal judgment of their loan officers.

Banks like stability and a record of growing profits. They like strong, positive cash flow. They don't really like repossessing things to get their money back. The your accountant's job is to help you accurately report how your business is doing (and help you save tax dollars in the process!).

Page 1 - 2 - 3 - 4


Small Business Tax CenterIdea Cafe HomeSign UpBiz Grant CenterCyberSchmoozCoffee Talk with ExpertsPeople in Biz ProfilesStarting Your BizBiz PlanningRunning Your BizFREE Trade PublicationsMarketingFinancing Your BizHuman ResourcesLegal & Biz FormsManaging Your BizeCommerceYou and Your BizGen XWork@HomeThe FridgeDe-StressSend an AwardSend an eGreetingYoga @ Your DeskWeb GuideIdea Cafe in the NewsAbout Idea CafeAdvertise on Idea CafeContact UsPrivacy PolicySite MapSmall Biz News

Copyright 1995-2024, Idea Cafe Inc. Downloads are for personal use only, not for resale to others, and may not be reprinted in any form without written permission from Idea Cafe Inc.

DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages.

TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business™, CyberSchmooz™, and BizCafe™.




Each week we pluck reader questions from CyberSchmooz and ask our savvy biz experts to give you their ideas -- compliments of the house! Got biz questions of your own brewing? Go post 'em in Idea Cafe's CyberSchmooz. You'll get peer-to-peer help from fellow entrepreneurs. And bookmark this page so you can check back here soon -- maybe our experts will single out YOUR question next!