Financial Forecasts –For Real? by Ken Easton

Here we go again – it’s about time to prepare the business’s 2011 financial forecasts for your annual reports, internal use, lenders, and the list does go on. We know that most everyone does try to get this as reasonably accurate as possible.  In today’s economy “blue skying” just doesn’t work.

However, the preparer is not infallible and the best laid plans will go astray but do not be burned by unforeseen events (economic or otherwise) – whether locally or globally.  On your forecast cover page (or even on each page) consider inserting the caveat “Forecasts are subject to a 5% – 15% variance due to conditions beyond our control”. Percentages shown are only samples – you put in what you feel is reasonable.

Consider the placement of such language after discussion with your accountant.  Of course, some prepare three types of forecasts: best case, most likely case and worst case.  Assumptions should always be present as to how the numbers were achieved.

Remember that forecasts are not commitments but are rather reasonable estimates based upon the world as we now know it. OK – Go to it!
Kenneth “Ken” Easton brings to his business clients, readers of his book “$urviving Your Business Debt” and subscribers to his free monthly newsletter “Biz Financing Tips”, audiences and workshop participants, his many years of comprehensive “in the trenches” successful business finance/lending/consulting expertise.   Ken’s mantra may best be described as “Being both forewarned and forearmed businesses can employ courses of actions which may save their business, their fortunes and their peace of mind.”   To learn more about Ken and his offerings to business borrowers, lenders, accountants, attorneys and consultants log onto www.TheEastonGroupLLC.com and www.SurvivingYourBusinessDebt.com.  Ken’ says regarding his free monthly “Tips” newsletter: “The tip you miss may be the tip you need”.

Document Those “Special” Arrangements You’ve Made with Your Lender

“Look, I know it’s not in the Loan Agreements, but trust me, it’s a deal between us. I won’t let you down”. As a business professional you feel you can safely take you lender’s word that side comments will be honored. Wrong Move!  While all intentions may be the best, at that time, the realities of life will impact such special and verbal arrangements – and, of course, at the worst time.  It’s OK to trust your lender – but does his trust in you preclude his institution’s loan agreement? Of course not!  Your lender may be transferred to another group, leave his bank, may move away or may die.  Sorry – no one’s there to verify such special arrangements.

Easy Fix! Through the use of written and executed “Side Agreements” – usually developed by your attorney and (usually after some negotiations) executed by the Lender – any important “understandings” are now cast in stone.  Such Side Agreements then become an important part of the overall loan agreements.  Side Agreements are hard evidence of additional, and enforceable, agreements made outside of the basic loan closing documents.  For example, under what conditions will loan covenants be modified, will improved business performance trigger some flexibilities as regards salary limitations on owners and officers, what about limitations on capital purchases, under what circumstances will modifications to collateral advances or collateral eligibilities be considered?  Future modifications of Loans to Officers are frequently addressed within such Side Agreements. The loan officer said he would release your personal guarantee - when?  Get it in writing – always!

Kenneth “Ken” Easton brings to his business clients, readers of his book “$urviving Your Business Debt” and subscribers to his free monthly newsletter “Biz Financing Tips”, audiences and workshop participants, his many years of comprehensive “in the trenches” successful business finance/lending/consulting expertise.   Ken’s mantra may best be described as “Being both forewarned and forearmed businesses can employ courses of actions which may save their business, their fortunes and their peace of mind.”   To learn more about Ken and his offerings to business borrowers, lenders, accountants, attorneys and consultants log onto www.TheEastonGroupLLC.com and www.SurvivingYourBusinessDebt.com.  Ken’ says regarding his free monthly “Tips” newsletter: “The tip you miss may be the tip you need”.

Your Big Bank Not Lending to Small Business? No Surprise! – by Ken Easton

We’ve all been reading the same thing – while most larger banks do now have the supporting capital base (sometimes through stimulus funds) they are not lending to the small business sector.  Many of the larger banks are reporting that loan demand is way down.  NO KIDDING! Few small businesses can no longer qualify for business loans in this economic climate. And the Banks’ response – they are not going to take unwarranted risks in this uncertain economy.  Too, most banks’ “Risk Rating” structures have not changed to recognize today’s reality.  So they are “saved” by their own internal measurements. If you don’t know it – “risk ratings” are like a bank’s internal credit rating for each existing or new business customer.

But how then do you account for the accelerated small business lending (and successes) enjoyed by community banks, credit unions and alternative lenders?  Basically these lenders are simply making the effort, have a controllable and flexible loan approval process – complemented by realistic credit and collateral flexibilities.

Smaller lenders are “on the street” – trying to make deals. While large institutions are buried in their own “policies” – small ones are touting their “flexibilities” – and delivering.  Both can seek SBA loan guarantees.  Even when their ability to make large loans may be impacted their size; smaller lenders can participate with like lenders still developing the loans needed. Most big banks are usually non-performers when it comes to supporting their small business community. I know – I’ve been there!

Ken Easton brings his many years of comprehensive and successful business finance, lending and consulting expertise to his business clients, audiences, readers, and workshop participants.  Ken is the author of “$urviving Your Business Debt” and his monthly periodical “Biz Financing Tips“, available at www.survivingyourbusinessdebt.com.  For further information, visit www.TheEastonGroupLLC.com.