5. Accepting weak any bodies. Whether its weak staff, weak clients, weak strategic alliances, or anyone else in your support realm. If you are attracting weak people, you are giving weak signals. Change your signals and you will change what you attract. To attract strong people, you need strong signals.

6. Confusing possibility with reality. One of main characteristics of an entrepreneur, and this could be one of reasons people may not like using name, is their gift to see everything in possibilities, yet spend money in world of reality. Money is always reality.

7. Selling or trying too hard to explain what you sell. If you find yourself pushing what you're product or service does, it is time to change your "success formula." Common causes are: (1) You are trying to sell to someone who isn't your target, or (2) If you have right target and you don't know what you are selling. You can only handle this in two ways, know what customers are buying, or know benefits of what you are selling. Benefits in terms customers need to hear and understand, not what you choose to say.

8. Lack of any or adequate support structures. If it takes a village to raise a child, what do you think it takes to raise a business. Surely, not a lone ranger. Work with others to help handle your many business and personal needs. Entrepreneurs need support, even if it’s only a feeling. Arrange to have a support structure for every part of your business. Keep in mind tip number five above for this as well.

9. Over or under delegating. It is so hard for entrepreneurs to begin to delegate. Yet once they do they seem to swing pendulum completely to opposite side and over delegate. Over delegating is "dumping" on people. Even paid people, don't like being dumped on. Feeling in control is a need of most people, entrepreneurs aren't any different. They look at it as a money or trust issue, when in actuality it’s usually a control issue. Delegate appropriately and with people that think you can trust. Let trust build over time.

10. Stop giving up so easily. Successful entrepreneurs don't see failure. They see learning lessons. They pick themselves up, dust themselves off, change and adjust, and keep moving. Being an entrepreneur, during early years of a business -- that is under five years for most professionals, takes more work than being an employee. Even if you are a graduate with an MBA in business. Don't include your learning curve time in with rest of your time. Everyone has a learning curve of some kind.

Equity (Tangible Net Worth) When I refer to equity, I really mean tangible net worth or equity in a business less any intangible assets. Intangible assets can include (but are not limited to) goodwill, patents and sometimes prepaid expenses. Depending on arrangement with bank, shareholder loans may or may not be considered as part of equity base. A ratio of tangible net worth to total debt of 1:1 or better is a good goal to shoot for. Basically, bank wants to make sure that owner has also invested in company, that company can support its present and future endeavors and that it has ability to withstand any unplanned declines in business.

Debt Having debt is not bad, but having too much debt is. Look at what make-up of your debt levels are and what debt has financed. Does maturity of debt properly reflect related assets? Is there any term debt supporting working capital, or revolving debt supporting long-term assets? If answer is yes then you should look at restructuring debt to properly reflect assets. Review company’s debt in relation to company’s cash flow and assess its ability to meet debt obligations. Do you have required credit available to meet seasonal borrowing requirements?

Inter-company assets/liabilities Keep in mind that bank will not lend off of inter-company receivables. Next, you should be able to answer following questions: are assets liquid and do they have value, can related company meet its obligations, what are terms of outstanding debt, is there any off-balance sheet debt or assets, can funds flow freely between companies?

The Income Statement

The income statement provides information on a firm's operating activities over a specific period of time. In simple terms it is revenues less expenses. However, as is seen by all accounting scandals recently, how those revenues and expenses are recorded can often be left open to interpretation and manipulation. A lender is well aware of manipulation that can occur and so will look at income statement carefully. If there are any “gray” areas lender will want clarification, so be prepared to be able to answer any questions asked of you. Or, have your accountant prepared to answer any questions.

As with balance sheet, a lender will rely heavily on trends and key ratios and will want to know why of any significant movements in these ratios. Key areas they will focus on are growth or decline in sales, net profit, gross margin and administrative expenses.

Important areas you should be aware of are:

• Are you expensing or capitalizing expenditures? • Are operating profits stable? • Are there areas of weakness? If yes, what action is management taking to work on these weak areas? • Are there any extraordinary losses of gains? • Are inter-company transactions having an impact on profits? • What transactions are being completed to minimize profit and tax?

The Cash Flow Statement

The cash flow statement is a summary of a company’s cash flow over a period of time. It is basically actual (i.e. not accrual) cash receipts less actual cash payments. A cash flow statement will have 3 parts to it: 1) cash from operations, 2) cash from investing activities and 3) cash from financing activities. The bank will be most concerned about cash from operations as this tells it whether company can generate sufficient cash from day to day business activities to repay loans. However, it is still important to be able to generate a cash surplus after all activities – i.e. operations, investing and financing. The quality, consistency and sustainability of cash flow is key.

Important areas you should be aware of are:

• Changes in working capital – movements in accounts receivable and payable and inventory, especially for a growing company, can mean a company is a net user of cash. This may indicate liquidity problems. • Look at ratios such as sales to cash from operations and interest and principal payments to cash from operations. Negative trends can indicate lack of controls, inefficiencies or bad investment decisions. • Look at factors that may impact total cash flow (cash from all activities) such as dividend distributions and taxes. • Are there any extraordinary items affecting cash flow? • Are there any capital expenditures which may have a negative impact on total cash flow? • Examine relationship between change in sales and change in cash flow. Are there any weak spots such as a declining gross margin? What action is management taking?

As you can see that there is a lot of information that needs to be assessed. That is why it can take a few days to get back with lending decisions, particularly if statements are complicated. The goal is to provide you with a basic understanding of what is being looked at so you can be prepared when approaching your lender. As always, more prepared you are, better chance of success you have.