Financial Health for Your Business
Have you done your check-up lately?
by Martha Flores Perez
A business financial health check-up is an assessment of the current state of your business. Past documents of how you have managed, such as tax returns, balance sheets, and income statements, will help in x-raying your company. Business owners go through a detailed financial assessment when requesting capital injections from a financial institution. However, rejection is often the result because they have not done a check-up on their business prior to meeting with the lending officer.
Given his 20 plus years in business development with a focus on capital access for entrepreneurs, Kevin Chu knows what lenders are looking for during these financial assessments. He is a program manager at Business Outreach Center Network (BOC) and the senior loan officer at BOC Capital. He counsels one-on-one Ascend business owners from New York and Long Island Kevin suggests that business owners think of ratios evaluation as a necessary annual check-up that, like our bodies, our businesses also need. This assessment "gives a picture of what is trending in your business. You cannot go back a year to recall decisions, yet in looking at the past, you can ask whether the financial patterns are relative." He adds that a check-up helps in planning seasonability.
Kevin guides business owners through a financial worksheet to provide a thorough analysis of the state of their company. Before doing any of that, Kevin gives a ratios presentation and asks his client to practice while they go over the form. He goes over the terminology and what these ratios mean to the business owner's reality. Kevin does this assessment from the eyes of the lender. His goal is to avoid sending a business owner to a lender when they have a high chance of rejection while getting a hit on their credit score. An unofficial revision looks at their likelihood of receiving a loan. If the rejection is imminent, Kevin begins looking for other types of capital. He adds that it is essential to look at the business and personal financial snapshots. Sometimes, business owners pull from personal accounts to support their business and vice versa to support their lifestyle. For newer businesses, younger than three years, who may not have historical data yet, he consults with business owners by looking at the industry standards, trends, and cycles. For businesses older than three years, he looks through all the rations. However, three of the most important are growth profit ratio, operation margin, and net profit margin. Suppose your business has not had a financial check-up lately, then connect with Kevin. In that case, he has resources to help you understand ratios analysis. Kevin ends with, "I am only an email away!"
