There are hundreds of businesses in central Indiana in this predicament, so I decided to do a little research and come up with some guidelines of what it takes to get the attention of a lender in this “NEW” economy.

• Credit score of the owner of 720 or better.
• Decent payment history with vendors
• Debt service coverage ratio of 1.25:1.
• Debt to worth ratio 2:1 or lower
• A history of profitability
• At least 2 years in business
• Accurate financial statements

PROFITABILITY is the primary ingredient that impacts 5 of the 7 requirements listed above. In any economy, it is critical for management to keep focused on profitability. It is critical that the company work to a profit plan. It impacts if the owner gets compensated adequately and regularly; it determines if vendors get paid in a timely manner; it is one of the largest components in cash flow; it grows equity (which impacts the debt to worth ratio); and the longer the history of profitability, the more likely the company is stronger financially and as an added bonus – worth more.

And lastly, a word about accurate financial statements – although this seems like a no-brainer; it is a problem with many companies. Financial statements are the report cards that everyone outside your organization evaluates to see your performance as a manager.  If the information is inaccurate, it reflects negatively on your ability to run your company.  Accurate statements prepared on the “accrual” basis are the first step in managing a company well and getting your bankers trust.