| The FDIC seems to admit in today's ABC news story, | | | | business is securing stable and reliable lines of credit. |
| that there are more banks that really should be shut | | | | Cash flow is KING! Any disruption to your facility lines |
| down, but the FDIC doesn't want to hurt the public's | | | | means disruption to cash flow. If you can't pay as a |
| confidence in the banking system, so they are going to | | | | result of a temporary reason such as, your facility lines |
| take it slow on bank closings, even though it will cost | | | | are under review or you have to reapply, suppliers, |
| them more money in the long-term. What does this | | | | frankly, don't care. They will just stop providing the |
| article mean for those starting a small business? It | | | | goods. |
| seems deposits are protected up to $250,000 by the | | | | ...And what happens if you don't have goods your |
| government. But, what about your lines of facility for | | | | customers want? ...Your customers will just source the |
| your business? | | | | product from your competitor. Now, sending your |
| Your loan is regarded as an asset of the bank and | | | | customers to your competitor is simply not a good |
| should a bank fail, its assets including its loans book is | | | | idea. |
| sold. The new bank may have completely different | | | | What do you do now, having read this article? |
| guidelines and lending policies. Not all banks are entirely | | | | 1. You can't control whether or not your bank will fail, |
| comfortable with small business start ups, especially in | | | | but you can control the state of your business |
| these challenging economic times. You'll need to | | | | 2. Check the requirements of your small business loan. |
| understand your new banker's criteria on loans to small | | | | What are the financial covenants if any? |
| business, especially if you are a small business start up. | | | | 3. Understand the bank requirements of your financial |
| Does your agreement provide for annual reviews? | | | | performance and put in place, now, the strategies so |
| Check this and understand their criteria before your | | | | that you meet the stipulated criteria. With banks, there's |
| review. | | | | no excuses. If you have conditions you need to meet - |
| If you do have a new banker, make a point of | | | | just make sure you meet those criteria. |
| ensuring you do understand their lending and security | | | | 4. More bank failures mean instability, uncertainty and a |
| criteria and importantly, work to strengthen your | | | | lack of confidence. Consumer sentiment drives the |
| balance sheet. Is your loan subject to covenants? | | | | economy. Look at your plan for the next year and trim |
| Check this now so that when it is time for your review, | | | | your sails based on what you've learned in this FIDC |
| your numbers well and truly satisfy all the covenants. | | | | announcement. |
| Covenants are like certain financial ratios you and your | | | | 5. It looks like the economy's not out of the woods yet. |
| business must comply with, else the loan requirements | | | | Remember, cash flow is the life blood of business. In |
| are breached. It's serious if the covenants are | | | | your steps to starting a small business, plan always to |
| breached. If you don't know what this means, take | | | | have a reliable source of free cash flow. |
| your loan agreement and seek advice from an | | | | For more tips on steps to starting a small business, visit |
| accountant. | | | | the link below. |
| One of the most important steps to starting a small | | | | |