What your bank wants to see before renewing your line of credit
By Chris Greco, Founder and President.
Before renewing a line, your banker needs three things your books may not produce: statements that tie to the tax return, a balance sheet where every account reconciles, and the covenant calculated the way the loan agreement defines it. Everything else is paperwork.
The analyst's first move is to lay your internal year-end next to the return. A $70k difference with no bridge becomes a question, then a condition, then a delay. The second move is the balance sheet: undeposited funds, a loan balance that does not match the lender's, payroll liabilities that do not match the filings.
Build the bridge once and keep it. Reconcile every balance sheet account monthly. Calculate the covenant quarterly, before the bank does. Renewal becomes a calendar item instead of a fire drill.
Chris Greco
Founder and President, CFO Anywhere. CFO for owner-led companies since 2002. Executive MBA, Gies College of Business, University of Illinois.
About Chris →More from Chris
Cash flow · 5 min read
Profitable but always short on cash: the four places the money goesIf the P&L shows profit and the account does not, the money is in one of four places: receivables, inventory or work in progress, lumpy debt service, or a distribution and tax calendar nobody wrote down. Find which one and the forecast writes itself.
By industry · 5 min read
What we usually see when a dealer adds a second rooftopWhen a dealer adds a second rooftop, the owner is the only person who understands both stores' numbers and is on the lot all day. The factory statement gets done late by someone who does not reconcile floor plan to inventory. Departmental profit exists on paper and not in decisions.
Banking and lending · 5 min read
What we usually see when a buyer starts looking at the booksWhen a buyer starts looking at the books, the first thing they measure is the one thing the seller never has: working capital, month by month, for the trailing twelve months. The target they set becomes a price adjustment at close.