By Natalie Hopkins & Chris Mennel The economy is improving. The stock market is breaking records. Your organization spent the past four to five years either in a restructuring mode or struggling to show positive or even break even financial results.
Fast forward to the present – now you have identified additional program needs and ways to grow but are fearful no bank will lend you money without strong, historical financial results. There are several things you can do to make your organization more attractive to a new banking relationship.
Build the relationship. Your best chance of long-term success with a bank is to establish a relationship by regularly touching base, helping them learn about your organization and the challenges and opportunities it faces. Not-for-profit organizations may not utilize their banking relationships because there hasn’t been the need. However, when a financial need arises, you want to be prepared by having that relationship in place so you can approach your incumbent bank first because they already know your story.
Have a plan and updated policies in place. If you are fortunate enough to have built up reserves or investments over the years, make sure your bank or investment advisor is part of your team managing those funds. The board has the ultimate responsibility for approving investment and cash reserve policies, but a banker or investment advisor is often more qualified to ensure the policies are followed. Many investment advisors are happy to report the portfolio performance to the board. By making these individuals part of your team, their understanding of your organization will grow which will continue to build the relationship.
Don’t cut corners on compliance services. Should a lending need develop, one of the first items a potential lender requests is historical financial statements. Providing financial statements from an independent third party lends credibility to your organization. In an effort to save money, sometimes organizations downgrade their compliance services from an audit to a review or from a review to a compilation or even to nothing at all. Don’t jeopardize your future lending needs by cutting out these annual services.
Conduct a three-year financial statement projection. Consider a three-year financial statement projection rather than an annual budget. This projection gives the bank a complete statement of financial position, statement of activities and statement of cash flows along with notes stating board leadership’s assumptions. Showing them the cash shortfalls also shows how the funds will be spent allowing them to structure the most beneficial package for you.
One of the cornerstones of Alerding CPA Group’s success is the relationships we have established with area bankers. We recognize that one bank will not be the right fit for every client. Therefore, we work with a number of local banks and often receive proposals from four or more so that our clients can choose the package that best fits their needs.
If you have a banking need or want to discuss how to improve your banking relationship, please contact Natalie Hopkins, 317-569-4181 ext. 244 or firstname.lastname@example.org. Alerding CPA Group is an Indianapolis-based public accounting firm. Visit our website: www.alerdingcpagroup.com.
This post was written by:
Natalie Hopkins, CPA
Natalie services audit and assurance clientele with their annual compliance needs and general consulting services. Her client base includes wholesale/distribution, manufacturing, retail, service organizations, and health and welfare organizations. Natalie was chosen as an “Emerging Leader” by the Indiana CPA Society.
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