If you’re in the construction business, you know that sometimes all that stands in the way of you and a big project is a little cash flow. Our construction clients often ask us if their companies are decent candidates for bank loans, especially if they’re looking to finish big projects and need cash.
“People often think the worst because they’ve been unprepared in the past, are out of money and don’t have their paperwork prepared to respond to bank requests in a timely manner,” says Partner and Construction Team Lead Ian Grimbleby.
Clients who are very organized and prepared are attractive candidates for bank loans, Ian cautions that timing is the bigger challenge — often, when you need a loan, it’s because you’re in a bind, and you might not have the proper information at hand.
At Grimbleby Coleman, we’ve helped many construction clients put their best foot forward before applying for a loan. Here are our top tips.
Get up to date. Be prepared — your bank may hit you with requests that require up-to-date information, and they will need it quickly. Make sure you have your most current financial statements before you head to the bank. Ian cautions, “Would you bid a job unprepared? Treat the bank like a new customer or job, because that is what you are to them and they are going to evaluate you.”
You should always have relevant financial information on hand, including information from the past 6-12 months. A tax return won’t be enough information for financing, even if you’re simply looking for cash to purchase equipment for an upcoming job.
Know what’s important. The bank will evaluate key performance indicators (KPIs) such as working capital, interest coverage, profit margins and return on assets compared to the industry benchmarks. Of course, it is good, sound protocol to keep these financials current even if you aren’t looking for a loan. However, your bank definitely will want to see a list of assets that can serve as collateral. “If you have current assets (receivables and inventory) and equipment, but you’re just cash poor, you’re probably a good bank loan candidate,” Ian says. “If all your assets or equipment is financed and there is little equity in the business (for whatever reason such as losses or you pulled cash out), the conversation with the bank is going to be tough.”
Don’t be afraid to ask for help. It takes discipline to maintain good quarterly financial statements. Make sure your company’s financial statements are intact each month, and take the time to analyze and reconcile your financials. Go the extra step to make sure more than just your cash, accounts payable and receivables are accurate. You will need to understand the health of the entire balance sheet including fixed assets, payroll liabilities and notes payable. If you or your bookkeeper are falling behind or need assistance, our team is here to help get you back on track. Please give a member of our Construction team a call before your next loan meeting.
Wanda has been in accounting for nearly 40 years, over 20 of those with Grimbleby Coleman. You might say she's an accountant for a bunch of accountants--she handles the Grimbleby Coleman books and tax returns, as well as managing the office.
Because she doesn't work directly with clients, Wanda misses "the relationship and friendships you develop handling the client's work. The trust they build in you is very rewarding."
Hillary Clinton is a person Wanda admires. "With all she has been through in her marriage, she has only gotten better. She broke ground for many women in politics." Wanda also admires Taylor Swift: "She is so young and yet so mature in her career." And last but certainly not least, Wanda admires her husband, Chuck ("not famous to anyone but me"). He took on a ready-made family and became a great role model for our kids and our grandkids. He is the best dad, grandpa, and husband I could ever ask for."
In June, you'll find Wanda "taking care of our 2 granddaughters, playing in the pool or in the mud." In October, Wanda is on vacation "anywhere", and in January, she's relaxing at home "to prepare for tax season." Good plan!
Wanda's favorite number is 16. Because by the 15th of each month, I am done with billing, financial statements, and the tax deadline for the month."