The financial institution you should work with will depend on the size and needs of your company, and these may change over time. To secure the best banking partner, you need to know how these organizations look at you from a risk standpoint so you can optimize your business’s appeal. But you must also research which institution can best serve your lending goals. In this episode of Napkin Numbers, Scott & Rahsaan go over all the basics of bankability that will help you confidently secure credit.
The Importance of Bankability
Napkin Numbers Talking Points
[1:06] 3 Types of Banking Institutions
- National
- Regional
- Credit Unions
[2:34] Why Bankability Matters
- What is bankability?
- How do banks look at you?
- How can you best meet your lending needs?
- 5 C’s of Credit that banks use for risk management
[3:23] 3 Components of Financial Ratio
- Leverage
- Liquidity
- Coverage
[4:15] Leverage
- How to calculate it using debt and equity
- The ideal ratio banks look for
[5:16] Liquidity
- What it means and how to calculate it
- Comparing your current assets and liabilities
- The ideal ratio banks look for
[6:11] Coverage
- Are you making enough money annually to pay off your debt?
- Calculating your EBITDA
- Considering capital expenditures
- Ideal Debt Service Coverage ratio
[8:55] How to make your business a good risk
- Have a strong balance sheet and income statement
- Articulate your business plan effectively
- Be transparent
- Have strong advisors
[9:50] Common misunderstandings
- Getting help with start-ups
- Running a lot versus a little bit of money through the bank
- Pressure to show a constant profit
- Communicate with your banker
[10:36] 4 questions to ask your banker
- Finding a banker who can help your business grow
Finding the right bank for your business isn’t just about impressing lenders. Getting your finances in order and presenting a trustworthy, dependable image is important. But you also need to consider the best financial institution for your unique needs.
If you want to see where your company stands, try our free business evaluation calculator.
