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Think like a banker

Risk is inherent in trucking. It's a fact of life for small-business owners

Risk is inherent in trucking. It's a fact of life for small-business owners. Risk is also inherent in banks, which try to minimize that risk as much as possible when deciding who gets a loan and who doesn't.

Is there a plan in place that will convince a bank that your company is worth the risk? Banks don't look at just your credit rating or your company's Dun & Bradstreet Report profile; they look at revenues, costs, what your accounts receivable look like, and also the quality and diversity of your customers. Being worth the risk means managing assets like cash, equipment, property, accounts receivable, customers, employees and contractors — and having a plan.

Top trucking company executives are always on the lookout for innovative cost-saving ideas. They seek everyone's input from drivers to dispatchers to safety and sales people. Stay on top of the latest trends and news from your shippers' perspective.

If you decide to allow customers to pay on credit, be sure they can pay on time. Know your days sales outstanding. If you're receiving payment more than 50 days after dispatch or 40 days from delivery, you might have a problem customer, and problem customers can put your company in a tight financial predicament.

Know what you can get out of your company. Many owners unknowingly take cash from their operation for personal use under the philosophy of “it's my company and therefore it's my money.” If you don't understand your company's current financial situation, you may be taking money that is needed to sustain or grow the business. Banks want to see healthy balance sheets, not fancy dinners.

To make your company more attractive to a bank, it helps to think like a banker. Remember, banks don't lend money without doing their homework. Bankers will come prepared with trucking industry articles; studies from resources like the Journal of Commercial Lending or the Risk Management Assn.; information on your balance sheet, credit report, financial statement, profit-and-loss statement; and your business plan.

You've got the same information at your fingertips. Know your break-even point so you are aware of how much revenue you will need to meet daily and weekly cash flow needs. Know exactly what information the bank needs, then arm yourself with that information and be prepared to answer any questions thrown at you.

When it comes to your customers, know them and their business as well as you know your own employees. Do they represent a risk to your revenue. What's their credit rating? Paying history? Growth projections? What are their weaknesses? Are there problems on the horizon for the company or its industry? In other words, know anything that could interrupt your customer's business, and therefore their need for your services.

Becoming bankable helps you achieve self-capitalization, thus eliminating the risk in managing of your business.

Contact Tim Brady at 731-749-8567 or at

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