4 signs it’s time to meet with your lender

Finances are just one of the numerous priorities business operators manage. Yet when you’re busy working to meet a multitude of production and other business deadlines, you may miss common indicators that signal its time to meet with your lender.

Reshma Solanki, a senior loans analyst in corporate and commercial financing at FCC, says these four common signs signal it’s time to set up that meeting.

1. Cash flow

Cash flow is paramount and if you find it tightening, that's a surefire sign to pick up the phone and call your lender.

“That indicates to me that lot of things in either the market or the business are really going bad,” Solanki says, adding that business operators must advocate for themselves. “They need to say, ‘Hey, here is my situation; what are my options? what does my cash flow look like?’ They need to start meeting with a lender to figure out how they are doing.”

A lender will review financials, examine where and how much is being spent, evaluate the cash cycle, help consider market trends and more.

Cash flow cycles differ depending on the processing sector, ranging from 30 to 60 or even 90 days. Business owners should manage their cash flow by examining whether their receivables are timely and if they pay their suppliers too early. Establishing strong credit relationships with suppliers can earn additional credit and assist with this. These trends and cycles can help identify potential issues.

“We can figure out how their cash flow cycle is performing, if they are managing it or not and if it's a positive or if it's a negative,” Solanki explains.

2. Fixed versus variable rate expenses

Cash flow issues often involve fixed versus variable expenses. In the food and beverage industry, owners might be burdened by high fixed costs, particularly from lease and rental agreements. Solanki recommends an audit of such costs to ensure you don’t overpay. There may be room for negotiation depending on your business’s profitability.

“If you are in the rental property location and the lease is really high and most of your revenue is going towards that, what's the point?” she says. “Are you really making profit or are you just making money to pay the rent?”

A frequently overlooked variable expense is interest payments. Highly leveraged businesses might face significant interest costs, but restructuring debt can consolidate these payments and save money.

3. Inflation

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