Keys to Successful Borrowing: The Importance of a Great Accountant

quote | Keys to Successful Borrowing: The Importance of a Great Accountants

Having your financial statements periodically reviewed and updated by a great accountant is an investment that will pay off in a couple of ways. 

This is the third in a series of articles on using short-term loans to help small businesses succeed

For a moment, think of the finance community who’s there to support your small business as an ecosystem.  In that ecosystem, you have your bank, you might have a short-term lender, and if you’ve grown your business to a certain point, you might have some administrative staff – people issuing and collecting invoices, and doing your basic bookkeeping.  If your business is smaller, those tasks may even be done in whole or in part by your own self.

I’d suggest you make sure you have one other partner in your ecosystem, that being a good (or hopefully great) accountant.  Having a great accountant is much like having a great dentist.  You may not love going to see them, it’s never as bad going to see them as you think, and they’re invaluable to your personal or business health.  You can get away without visiting either one, but in the end, not going to see them always catches up to you.

Having your financial statements periodically reviewed and updated by a great accountant is an investment that will pay off in a couple of ways.

Keys to Successful Borrowing: The Importance of a Great Accountants

The first payoff of a great accountant

A great accountant force you to do things you might not want to do, but that you should do – complete inventory counts on time, measure what your real cost of sales is, and help you determine if you’re operating profitably. They’ll also help you keep up to date on all your statutory filings, so you don’t fall behind, or if you do, at least you’ll know with certainty as to by how much.  They may even be able to offer you advise on critical items such as how to compensate yourself effectively for tax purposes, and other items. It’s quite possible, and even probable, that they’ll pay for themselves many times over.

The second payoff of a great accountant

By doing all the items outlined above, you’ll be able to provide your bank with reliable information.  There’s an additional level of comfort added to reviewing financials that aren’t simply printed out of one of the usual accounting packages.  Lenders look for items to be in their right categories…to know exactly what they’re looking at.  Lenders try to determine if you’re profitable.  They do this to determine what amount, if any, they can lend to your business and still sleep at night.  Finally, they’re trying to determine if you did with the last loan they provided you what you said you’d do.  In other words, a great accountant can not only help you manage your business, but can help you build an additional layer of trust that’s critical in accessing additional capital from your primary lender, and other lenders, including those in the alternative category, equipment finance companies, and more.

So why do we say find a great accountant as opposed to simply a good one or a good bookkeeper? 

quote | Keys to Successful Borrowing: The Importance of a Great Accountants

The balance sheet doesn’t balance.  Columns on the statements don’t add up.  The list goes on, and on, and on.

It comes down to a couple of things. A bookkeeper may be ok to help you get up and running, basic organization, etc.  But as you move along in growing your business, people like us (lenders, alternative lenders, and equipment finance companies), just like the banks, need to see the information we think we can rely on.  We can’t possibly know the name of every good (or bad) bookkeeper.  But for the most part, we can rely on the professional designations of the accounting profession. Almost every day we receive an application for a loan with financial statements attached that, from our perspective, makes no sense. Things are miscategorized. We see inventory counts aren’t complete. Some numbers don’t change as they should from period to period. Different typesets are mysteriously used on the same document, indicating hidden spreadsheet rows or columns. The calculation of the cost of sales, depreciation, or other items doesn’t make sense.  The balance sheet doesn’t balance.  Columns on the statements don’t add up.  The list goes on, and on, and on.

We’re flexible in our reviews of financial statements – we have the discretion to call and talk to clients and make judgements in certain ways, and allow for some forgiveness.  However, not all institutions can, or will, make decisions that way. If you do get some flexibility in that regard, the expectation will be that you have better financial reporting in the future – thus you’ll need a great accountant.  You’ll need the better reporting to access greater amounts of capital, on terms that are the most favorable to you.  In that way alone, a great accountant will pay for themselves time and time again.

Read about the first blog post in the series: Keys to Successful Borrowing: The Importance of Borrowing the Right Amount

Read about the second blog post in the series: Keys to Successful Borrowing: The Importance of Financial Strategy

At Accord Small Business Finance, we’re always happy to speak to you about your needs. Check out our website for ways to talk to us – online chatemail, website form. We’re also happy to call or Skype.

Keys to Successful Borrowing: The Importance of Financial Strategy

Left quotes sign

If your business is growing, you’re going to find that the credit line they’re offering you isn’t at the ideal limits of where you’d like it to be. 

This is the second in a series of articles on using short-term loans to help small businesses succeed

A financial strategy isn’t just something for those large corporate entities you see on Bay Street in Toronto, 7th Avenue SW in Calgary, Portage & Main in Winnipeg, Jasper Avenue in Edmonton, or West Georgia Street in Vancouver.  Every business needs one, even if it’s relatively informal. When you’re borrowing money, having a strategy becomes even more important. 

With the emergence of numerous alternative lenders in the marketplace – being people like ourselves who provide short-term working capital loans and equipment financing – to others such merchant cash advance companies, peer to peer lenders, and others, many people have the impression that the best way to use an alternative lender is to replace their bank.

That notion forms the basis of an extremely poor financial strategy. 

First off, your bank (or credit union, with all due respect to both institutions, we’ll use “bank” to mean either/or) should be your first and primary source of working capital financing.  They will typically be your senior secured lender and the source of your lowest cost of funds.  They’re important to your future success.  They’ll look at your inventories and receivables, calculate a margin limit, and then provide you with an appropriately sized credit line.

If your business is growing, you’re going to find that the credit line they’re offering you isn’t at the ideal limits of where you’d like it to be.  When underwriting (credit evaluating) your file, they must rely heavily on your financial statements.  So, in effect, they’re always having to deal with historical information.  For them, the proof of how your business is doing is in your final results.

This is where an alternative lender can be effectively utilized.  Through alternative lenders, you can access a short-term loan facility which will bridge that gap between what your bank can provide you based on your historic results, and what you believe you can do, based on contracts in hand or sales trends, or sales opportunities under negotiation.

Here’s a suggested strategy.  Revolve your credit line with your bank as much as possible based on your cash flow cycle and your availability based on receivables and inventories.  Try to do two things – revolve your line (this will show your bank you’re using it in the way it’s meant to be used and build trust) and try not to use it in full – leave some room for those unexpected expenses.

Left quotes sign

Work only with lenders who have your best interests at heart. If you borrow too much, this strategy simply isn’t going to work.  Your bank won’t be happy.  Your short-term lender (who may have helped you get into the situation) won’t be happy.  Most of all, you won’t be happy – you’ll be stressed financially and not able to focus on your business.

Address the issue of financing your sales increases, new contract requirements, etc., using a short-term loan product such as we offer.  Borrow only what you need to facilitate the growth in your business, and set up repayment for a term that matches the completion of your seasonal sales cycle or contracts, for example, six months.  When you reach your next quarter-end, make sure your financial statements are up to date – everything on them – DO update inventory counts, DO reconcile your accounts receivable, DO push to collect your accounts on time.  Then go back to your bank and talk to them about increasing your line based on the results you can prove you’ve achieved. Work with them to increase your availability to reflect your new sales level.

Repeat this process as necessary – if you think you can once again achieve another, higher sales level, take another short-term loan. Grow your business. Update your financial statements. Visit your bank again. Keep revolving your credit line. Continue this cycle and keep growing.

Here’s a graphical representation as to how that cycle would work in the ideal circumstances.

This, of course, is the ideal scenario, and we know in the real world it’s not always that simple.  But if you follow the process, build an effective relationship with your bank and with your alternative lender, keep them both informed, and only use your borrowed money for their intended purposes, it’ll pay off.  By doing this, you’ll enhance your relationship with both your bank and your short-term lender, and you’ll grow your business without taking on undue risk.

Finally, don’t judge your short-term lender by who offers you the most money.  Borrow just the right amount, for the reasons as outlined in our first blog in this series.  Work only with lenders who have your best interests at heart. If you borrow too much, this strategy simply isn’t going to work.  Your bank won’t be happy.  Your short-term lender (who may have helped you get into the situation) won’t be happy.  Most of all, you won’t be happy – you’ll be stressed financially and not able to focus on your business.

Read about the first blog post in the series: Keys to Successful Borrowing: The Importance of Borrowing the Right Amount

Watch for our next blog post in the series which complements the topic in this one:  the importance of having a great accountant.

At Accord, we’re always happy to speak to you about your needs. Check out our website for ways to talk to us – online chat, email, website form. We’re also happy to call or Skype.

Keys to Successful Borrowing: The Importance of Borrowing the Right Amount

Grey quotation marks icon

At Accord, we take the approach that we won’t lend money to a business unless we truly believe we’re helping them.

This is the first in a series of articles on using short-term loans to help small businesses succeed.

Short-term loans can be used by businesses of all sizes to fuel growth, manage seasonal cash flows, catch up on payables, buy small pieces of equipment, make repairs or renovations and more.
(more…)

Infographic: Partner with Accord Financial For Your Equipment Finance

Accord Small Business Finance provides lease and loan financing to helping businesses grow across a broad range of industries

Founded in 2005, Accord rapidly grew into becoming one of the leaders in providing financial solutions and equipment financing to Canadian businesses. Below is an infographic of  the reasons why Accord Small Business Finance can be your equipment finance partner:
(more…)

Alternative Lenders & Business Loans: Is a Lender Really a Lender?

As a business owner, you’re undoubtedly receiving offers for business loans coming in the mail, e-mail (including spam), advertised online, or even from telemarketers. You’re probably seeing what seems like a long list of alternatives put in front of you. All these people reaching out to you seem to offer somewhat similar things, and they all seem to want your business. Perhaps some of these offers would be of interest to you – after all, sometimes a short-term loan would be useful in helping you meet your business goals, and maybe you don’t have the time available or information at hand, or the ability to wait, to deal with your bank or credit union. In such a situation, considering a loan from one of these entities that advertised to you in one way or another may be compelling.
(more…)

Accord Small Business Finance: Financing Equipment Repairs

Sometimes when it rains it pours, and over the past month, it seems to have been raining hard on transport owner-operators.  We’ve seen a significant spike in activity in this segment where truckers requiring significant repairs on their leased or owned equipment requested assistance.
(more…)

Accord Small Business Finance Mid-Ticket Transactions

In mid-2016 Accord Small Business Finance (ASBF) introduced our Mid-Ticket Finance offering.  This product targets companies requiring between $250,000 and $2,500,000 who wish to leverage the value of their equipment assets to enhance their liquidity.  To date, our transactions in the Mid-Ticket line have ranged in value from $250,000 all the way up to $7.9 million.
(more…)

Costs of expansion: Getting new equipment in the field

As the seasons change, it seems like we keep getting different types of client requests for funding through Accord Small Business Finance.  In September, there was a high volume of clients needing funds to deal with expansion costs or the costs of taking on new projects.
(more…)

Tips for Dealing with Lenders

Many business people seek coaching on how to approach lenders, sometimes from brokers, consultants, or accountants. These professionals can assist in different ways. However, there’s one thing you can do for yourself as a business owner that’s perhaps the most important step in approaching a source of financing. It’s simple, and it’s free: tell your lender your whole, complete, and straight-up story.
(more…)

Start growing your business now with Accord Small Business Finance!

Apply Now!

Start growing your business now with Accord Small Business Finance!

Apply Now!

We’re happy to help!

Contact Us

Have a question about business financing? We’re happy to help

Learn More

We’re happy to help!

Contact Us

Have a question about business financing? We’re happy to help

Learn More

Apply for a small business loan Now!