1. Imagine investing time and money into a product or services, only to find that it isn't selling. Or at least it doesn't have results that you expected. Now, I'm talking realistic here, and not some grandiose vision. It’s hard to give up something when you have invested your resources into something, more importantly, you have spout off to world (okay, friends and family) that you were doing it.

Gluing yourself to an idea, product, or service that isn't making any money or enough money to support business isn't smart. Ego and pride don't make money. Getting hitched to any one idea, or even two, that isn't profitable isn't smart. Every product climbs and falls -- even McDonalds drops a product when it doesn't test strong. Ideas are currency of entrepreneurs, make money with them or let them go.

2. Be proud of being an entrepreneur. Don't mumble it, don't call it by another name. Stand tall and proud. This includes title independent professional -- another name for entrepreneur. As if, being an entrepreneur isn't professional.

At networking events, when asked if they are an entrepreneur, people respond in funny body language. Some shift their stance uncomfortably. Sometimes their hand goes over their mouth and they let out a barely auditable, yes. Or they correct it with some other title. For some reason name entrepreneur seems to have caught a disease.

3. No bologna (or b.s.). Entrepreneurs can be naturally excited and optimistic about what they are doing. Don't let excitement sound like hype. Because of this people don't trust you. Don't just tell pros, add cons. Let people know, who is best person for this service – not everyone, or what circumstances are best for product. People aren't stupid but if they have to figure cons of product or service, you will most likely lose sale.

The Basics

The bank, or any investor for that matter, uses financial statements to tell them what happened in past. Statements are also used as a means to predict what will happen in future. Creditors are concerned about whether income (cash flow) will be sufficient to cover interest and principal payments on their debt. Of course, predicting profits into future is an uncertain science. For this reason, creditors use various analytical tools to help them assess and interpret key relationships and trends that will help them judge potential of success in future. It also helps them predict whether a firm has sufficient resources to handle a temporary financial crisis.

Financial statements are historical documents covering single time periods. Users of financial statements, however, are not so much concerned about single time period as they are about trends over time. Trend analysis is usually completed on key indicators, such as revenues, gross profit margin, operating expenses, and working capital components such as accounts receivable, accounts payable and inventory. Through comparison of ratios and trends you can make informed judgments as to significance of results. That is why banks or other investors often want 2 or more years of business results before they will lend.

Although trends and ratios are a starting point, they can often raise questions, answers to which you can only get through analyzing industry trends, economic factors and company itself. Typically, unless you are a master of presenting information, bank lenders will ask questions of you and your business. This is normal as they are trying to learn as much as possible about you and your business. Once again, be prepared, this will show you understand your business and its finances and that will make bank more comfortable in lending to you.

The Balance Sheet

Banks primarily lend off balance sheet and cash flow statement (primarily operational cash flow). That does no mean that income statement is not important, it is, but balance sheet essentially encompasses what happens on income statement and cash flow statement tells a lender whether you are actually generating enough free cash flow from which you can make debt payments. So what is important on balance sheet?

Working capital Current assets minus current liabilities, working capital tell us how much short-term assets we have to pay off short-term liabilities. The greater amount of working capital more funds a company has to finance its growth. A negative number is not good and can signify pending trouble. A typical rule of thumb is a ratio of assets over liabilities of 1.5:1. Questions you need to be able to answer are: trends in ratio, what are components of assets and liabilities and how liquid are current assets (for example, not all inventory can be liquidated quickly).

Accounts Receivable You want to maintain your receivables in line with industry standard, or better. High growth companies can often have a high growth rate in receivables that they need to finance, but average number of days outstanding should not get out of hand. If they do, for example climbing from 60 to 90 days or more, this often indicates a weakness in management. If this happens be prepared to have a plan in place to reduce outstanding receivables. A lender will typically look to answer following: is there a concentration to a few buyers, what are age and terms of receivables, what is quality of receivables and what is value of receivables in a liquidation scenario?

Accounts Payable As with receivables, you need to maintain payables in line with industry standards. Often, growing companies will let payables stretch to finance growth, this is ok in short-term as long as payables don’t go overdue and you maintain good relations with your creditors. Once again, age of payables will be looked at as well as any concentrations to a few creditors. Make sure all payables are up-to-date and any security priorities should be noted.