I am regularly involved in raising capital – mainly Bank debt for my clients.
This means discussions, submitting documents, answering questions, receiving a proposal (or being rejected!), evaluating competing offers, sometimes a collateral audit and final signing. An important thread in all of this is, preparing and providing financial reports and information. Once the loan is granted, there is maintenance work – preliminary, monthly and/or quarterly reports.
The goal is to begin and maintain an open and honest relationship with your Banker that is long term.
How do you do this?
You do this by infusing confidence in the lender from the very start.
I do this in a structured way:-

• Bank Package – Start by providing complete and comprehensive Financials and other ancillary information that the Bank wants and in a format they can understand.
• Quality – Ensure the above is done with all schedules, reconciliations done and agreed. Point out discrepancies – do not wait for them to find out!
• Initiate preliminary discussions. Ask to meet them to amplify or clarify your Bank Package.
• Updates – During the process of credit review by the Bank (and if it taking time) provide updates. Information does get stale and lenders like to see the newest information.
• Inform and point out any changes to your business via reports.
• Receive the loan proposal and review – look at conditions and covenants and do a stress test. Forecast several scenarios under your stress test and show it to your Bank.
• Accept final terms after discussions and negotiations.
• Bank Collateral audit – at this time the Bank may schedule a collateral audit if you are pledging the firm’s assets – Inventory, Receivables and other assets. This requires considerably more information than 1 and 4 above and must be consistent with the above same points. You will get a “laundry list” from the Bank’s auditor of requirements. Turn this around in a reasonably quick time period. After this, there will be a field visit. Here the auditor wants to “touch and feel�? He will ask for sample invoices, Inventory counts, detailed Receivables information and related information. Work with him closely to provide this.
• Now, depending on a satisfactory audit, your loan is approved and after the paperwork, it becomes available.
• Maintenance – This is to submit monthly and quarterly information as per your loan conditions. Advice the accounting dept. of new requirements, any changes in record keeping and any deadlines.
• Be proactive – always think ahead about what is happening in your business and how it affects your Bank loan terms. This will entail you doing good forecasting. Do it and test your covenants and other conditions under these forecasts.
• Banks hate surprises – They do not want to know at the last minute of some deterioration in your business or discover it by examining your routine reports. What they like is an early warning and your action plan to work through this and recover. This shows them you are proactive.

Follow the above and your Banker will respect and like you.
– See more at: http://www.msncfo.com/msnBlog_October082012#sthash.KlBzAL5x.dpuf