BY JOE MOSS

During the past few years, it’s been tough for small business owners to be optimists. The decline in revenues and profits has often made it a challenge to make ends meet – and especially to repay bank loans. 

However, even in the current irrational economic environment, there are things you can do as an entrepreneur to rationally manage your finances and your debts. Here are some tips that can help you handle your loans, avoid foreclosure, and position your company for the turnaround we are confident is coming. 

1. Objectively look at the financial position and performance of your business – Are you getting the maximum return from your investment? If not, why not? Are your non-business assets generating a maximum return? Is it possible to sell any assets that are not contributing to the financial health of your business? Remember: in tough times, survival is the goal -- and cash is always king, so keep enough money available to fund emergencies and slow cash flow periods. 

2. Examine how your debt is structured -- Do you have an imbalance between your long- term and short-term debt? Is it possible to increase the long-term debt to pay down the short-term debt? For example, you may be able to increase monthly cash flow by spreading out your short-term debt over a longer period of time. Be cautious when taking a loan against your long-term assets, such as real estate, because it's like drawing against your "life" savings account. If you're going to use your long-term equity as collateral, make sure the need is critical to your business.

3. Deal with financial problems immediately -- When an issue arises that impacts your cash flow, be proactive and be quick. Talk to your banker early and often. The best way to avoid serious financial problems is to identify and resolve them as soon and as fast as possible. Though discussing financial difficulties may be uncomfortable, many problems are best resolved by a team. Create a personal "board of directors" consisting of people you know and respect, who can be your objective sounding board and trusted advisors. Be sure your banker is a member of the group.

4. Conduct a financial review with your banker – Schedule an in-person meeting with your banker to review in detail your current inventories, cash flows, and balance sheets. Bankers are typically very willing to spend time with business customers so financial issues can be solved in a mutually acceptable way before they get too big and too out-of-control. If you have ideas about certain solutions that could help your business, write them down so you can discuss them thoroughly during the meeting with your banker. 

5. Know the financial condition of your bank – Before you pursue a workout plan or the the refinance of a discounted payoff for an existing loan (DPO), find out the bank’s “Texas ratio.” It’s a measurement that’s commonly used to indicate the relative strength and soundness of a bank – the lower the ratio, the more stable the institution. A struggling bank may be receptive to workout plan or DPO because it typically represents an infusion of cash, while a bank that has acquired your loan through the recent acquisition of a failed bank may be interested in reducing its exposure to your loan or to loans in your specific industry. 

6. Ask your banker about the Small Business Administration (SBA) guaranteed loan programs -- Your banker may be able to restructure your business debt over a longer period if the SBA is willing to provide a credit guarantee on your loan to the bank. If your business is located in a qualifying rural area, your business may qualify for a “Business and Industry Guaranteed Loan” offered by the U.S, Department of Agriculture's Rural Development Agency. Many states, including Georgia, offer financial and technical assistance to small business owners. Your banker is a good source of information about additional financial resources available to you and your small business. 

7. Maintain your perspective -- One of the best ways to think through business problems is to get away from them. For example, take a weekend off from work to spend time doing things you enjoy with you family or friends, such as going to the movies or on a short get-away trip. Studies show that temporarily putting problems aside, clearing your mind, and shifting your focus can be a good way to come up with solutions to those problems. It’s the same process that happens when we forget everything while we sleep and allow our sub-conscious to see more clearly. 
As these unsettled times become more settled, we at Embassy National Bank are here to help small business owners win – no matter what happens!



Joe Moss is President of Embassy National Bank, a community bank located in the Atlanta suburb of Lawrenceville which is one of the leading SBA lenders in the southeast. He has served as President and Chief Operating Officer (COO) with Appalachian Community Bank in Ellijay, Georgia and as COO with Caribank in Pompano Beach, Florida. He was a partner at Ceto & Associates and was a senior executive at KPMG Peat Marwick, positions in which he consulted with and enhanced revenue at more than 500 banks across the country. 

Contact him by e-mail at jmoss@embassynationalbank.com or by phone at 770-500-1271 with your questions.



       
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