Bankers want to lend money when you don’t need it

The common addage is that you shouldn’t go to a banker when you need money. That’s the time when they won’t lend you money. Sort of perverse, but that’s the reality.

When you have lots of money and don’t need them except as a depository for safe keeping, that’s when many bankers will be on your doorstep asking to be your supplier of choice to borrow money.

Mark Twain probably said it best when he said:

“A banker is one who lends you his umbrella when the sun is shining, but wants it back the minute it starts to rain.”

This is another way of pointing out that planning is essential for success. When you create a business plan, you will have a much better idea when you will be short of funds. The shortage can be caused by an investment in capital, an investment in people (growing new practice areas, for example) or an investment in accounts receivable (caused by increase billings to existing and/or new clients).

In advance of these periods of shortage, create your banking relationship so that, when the need arises, you only have to pick up the phone and ask for a transfer of funds. The banker in this scenario is pleased to do so because you’ve sold him earlier on your knowlege of your business and profession … He understands that you understand what will be needed and when. And, of course, equally important, that you understand when and how the loan / line of credit will be repaid.

One of the best sources of revenue, for any firm, is existing accounts receivable. Most firms fail to pay enough attention to this resource. Weekly, and no less frequently than monthly, prepare an aging of your accounts receivable and have someone in your office (not you) call clients to determine that they received the billing, they understand it and clarify when it will be paid.

For more information on collections, see Collecting Your Fee: Getting Paid From Intake to Invoice (ABA 2003)

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