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Bankers - Where Are They When You Need Them?
Most retailers are constantly in and out of the debt market to finance daily operations. Having a reliable lender is vital to your success. Recognize that your banker - the "relationship manager" - is in fact a salesperson; the actual credit decision will be made by "the loan committee".
Your responsibility is to arm your banker to effectively present your request to the Loan Committee. And that demands that you "speak their language". Especially in today's economy, the need to speak "Conversational Banker-ese" is greater than ever.
Plus, consider carefully the pro's and cons of different types of financial partner you might approach. Let's start with an overview.
Advantages Disadvantages Traditional Banks Stability Array of financial services Many to choose from Competitive pricing Lack of retail industry experience or focus Often slow to respond; impersonal Less interested in smaller transactions Generally available only to profitable companies Private Equity Funds Provide "hands on" value/added expertise Generally well-capitalized May provide access to industry and management expertise Provide "hands on" value/added expertise (Yes, it's the good news/bad news thing!) Strict investment criteria Equity ownership required Required returns often 25% + Require track record of a proven concept Asset-Based Lenders Nontraditional transactions Fewer financial covenants Industry focused Rigid documentation standards Higher transaction costs Onerous reporting Traditionally perceived as lending only to troubled companies
Have you ever nodded knowingly when someone talked about his/her (or your) current ratio, all the while wondering what “current” meant—let alone “ratio”? Have you ever asked your bookkeeper for a list of your accounts payable so you could “get those people to pay us”? Have you ever secretly dreaded that someone would find out you don’t know all that you’re supposed to about running your retail business? This first in a series of three articles walks through the basics of "conversational banker-ese": all those retail financial terms you need to feel comfortable with when talking with your banker. read more ...
Most of us treat banks as if they are utility companies or government agencies. Your bank statement even resembles a utility bill. But don't be fooled. Banks are in business just like you. Only they rent money. That branch office is a retail outlet. Your banker is a highly trained salesperson. His or her job is to rent you money in a manner that guarantees the bank a profitable return. To that end, bankers want to reduce as much risk as possible. read more ...
Quick now, define debt-to-worth. How about net worth? What’s the formula for calculating turnover? Did you have to slow down a bit to answer the above questions? Then this “Conversational Banker-ese” series is for you. In three articles, we’re covering the basic terms of retail financial management. Mastering these should make you more comfortable in discussions with bankers. read more ...
This is the third in a three-part series of learning "conversational banker-ese": the basic retail financial terms you need to be comfortable when talking with your banker about your business. read more ...
Sales up. Sales down. Retailers of all sizes are forever battling to maintain a steady and positive cash flow. As you probably already know, short-term bank loans can smooth out tricky highs and lows in your annual revenue, making it easier to manage your business efficiently. read more ...
Now. Learn Basic Retail Finance. At your own pace. 24/7.
Profits & Debt Management - Financial Statements - P&L's - Balance Sheets - Inventory Management (@Cost or @Retail) - Turnover - Buying Plan Budgets - GMROI - Cash Flow - pro formas - Ratio Analysis - Integrated Retail Financial Plans
The ROI's Online Seminar on Retail Finance Basics is an interactive, self-paced course. By retailers, for retailers. "All it takes is a little desire."
Includes interactive content, self-quizzes, printable worksheets, extra how-to articles by retail experts, and a special case study featuring Helen and Irving Surviving of The I. M. Surviving(?!) Company.
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No retailer really wants to pay for bookkeeping or accounting. But it's necessary for two reasons: (1) to accurately satisfy the I.R.S.; (2) to accurately show where the business has been and where it is now. This second reason is essential for what REALLY matters: doing better in the future! The ROI has developed The Screening Test for Retail Bookkeepers. As an ROI Member you may download a free copy of that test to use as you interview prospective bookkeepers.
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