This is the final post in the series about bank financing. In Parts I-IV, we explored topics such as profitability, cash flow, industry outlook, balance sheet impact, and collateral. In this final article, we consider the important roles that management experience and strategic planning play in the lender’s approval process for manufacturing and wholesale distribution companies. Continue reading
The 5 C’s of Credit Revisited: How Bank Loans Get Approved In the Age of Increasing Regulation, Part IV
This is the 4th post in a series about bank financing. In Parts I-III, we probed issues such as profitability, cash flow, industry outlook, and balance sheet impact. In this article, we consider the vital roles played by collateral and personal guaranties in the evaluation of credit requests from manufacturing and wholesale distribution companies. Continue reading
The 5 C’s of Credit Revisited: How Bank Loans Get Approved In the Age of Increasing Regulation, Part III
This is the third post in the series about bank financing. In Part I and Part II, we entertained various aspects of profitability, cash flow, and industry factors. We move now to the importance a strong balance sheet has in shaping favorable outcomes to credit requests from manufacturing and wholesale distribution companies. Continue reading
The 5 C’s of Credit Revisited: How Bank Loans Get Approved In the Age of Increasing Regulation, Part II
In Part I of this series, we discussed the importance of three P&L categories, i.e., cash flow vs. debt payments, revenue and earnings trends, and diversification of revenue. As we delve further into how bank loans are approved in today’s environment for the manufacturing and wholesale distribution sectors, we will mine a few more nuggets that should always be kept top of mind.
Even if you have no immediate plans to borrow, you never know when that one, great opportunity may arise. If your company is not in tip-top financial shape on that day, your ship might sail without you, and I don’t want that to happen.
Industry outlook, product demand
First, the good news. If you are a manufacturer or wholesale distributor, you are in industries that are generally in favor with banks. That is to say that banks have certain businesses that they want to avoid due to historical loan performance results, and you are less likely than most to be in one of them. Obviously, some sub-sectors are exceptions, depending on the consistency of product demand and other factors, so this is not an absolute. Continue reading
The 5 C’s of Credit Revisited: How Bank Loans Get Approved In the Age of Increasing Regulation
Most entrepreneurs and business owners are familiar with the traditional 5 C’s of credit as the gold standard by which creditworthiness is determined. This article will take a closer look at how the commercial banking industry evaluates credit requests from small to medium size businesses in the manufacturing and wholesale distribution sectors in the current business environment, which is punctuated by ever-increasing regulatory scrutiny of the lending process.
Outlined below are the first three of several critical components of a typical bank’s credit approval criteria for business loans. The discussion will be continued in a series of subsequent articles covering additional components of this process. Continue reading
About the author: Joe Christian operates Trinitas Consulting Group, a business consulting firm helping manufacturing and wholesale distribution companies with revenues of $5 to $50 million improve earnings and access financing. He is a former bank executive with over 25 years experience and knows what lenders want to see so that you can get financing approved to grow your business. He has worked with hundreds of companies and can provide unique insights about how you can improve your profitability. He is a member of the Association of Accredited Small Business Consultants, Inc., and is certified as an Accredited Small Business Consultant.