Part 2 of a 3 part series
Warning Signs:
- Increasing net sales to net working capital.
- Rising net fixed assets to tangible net worth ratios.
- Rising debt to tangible net worth ratios.
- Difficulty borrowing funds.
Steps to Improve: THE BANKING RELATIONSHIP
- Watch out for unsound banks.
- Be sure the company's major banks are financially strong.
- Level with your banker about financial problems.
- Draw up contingency plans.
- Don't surprise your banker with bad news; do surprise your banker with good news.
- Use spare cash to pay down lines of credit.
- Exercise dormant lines of credit.
- Refinance or pay off loans when it will trim interest costs.
- Refinance loans when it will increase cash flow at reasonable cost.
- Be sure the bank you use is offering you competitive terms.
- Be sure you are receiving the most favorable financing available.