Get your banker hooked and net cash to fuel growth

A growing business adds customers, expands inventory, buys equipment, and hires new staff. The future looks great on paper, but the additional expenses bring a cash crunch, particularly if collections are slow.

What can you do if you're in this situation? As a former banker, my initial reaction is: Sit down with your banker, explain your problem, and hope for the best.

Bankers look for good collateral, assets that you can liquidate quickly if needed. You may show you have more than enough assets in inventory, accounts receivable, equipment, and goodwill to cover a loan, but unless you have a long-time association with your banker, this probably won't be enough. Before you leave the bank, consider these strategies:

• Get to know your banker personally. Convince him or her you have a good future by showing your business from front to back, introducing your team, and talking about your clients.
• Keep your banker updated with sales and profit reports.
• Do a good job on public relations. Illustrate your standing and reputation in the market and your competitive advantage.
• If you have an opportunity to grow quickly, go to your banker and clearly show your potential. Provide a detailed explanation on how you want to expand.

Good bankers want to grow with you, and the only way for that to occur is for you and the bank to become partners. Most bankers will agree with me: They want to see success and will lean over backward to contribute toward that success.

However to comply with regulations, banks must maintain a file on each account that will pass inspection if and when the regulators visit and assess loans. If they question your loan, your bank officer can better defend you if he or she knows you, your business, and your hopes for the future.

Editor's Note: Next month we'll look at other options for easing out of a cash crunch.

Denton Harris, a former banker and magazine publisher, is a freelance writer in Atlanta.