NATDA Magazine Nov/Dec 2016 Volume 9 Number 4 | Page 56

Any time your dealership decides to acquire capital or work with a new lender, the lender will typically require two years of financials. You may wonder, “Why do lenders need my financials and why two years’ worth? They aren’t loaning money to me. They’re loaning it to my customers.” Lenders trust you to complete the loan closing process on their behalf and two years of financials enable lenders to determine the sales volume for a dealership, to see the dealership’s growth from one year to the next and to project how much business the dealer will be sending. A lender typically knows very little about your business other than what you show them from your financials. Have you made sure they are accurate and considered whether they are presenting your company appropriately? For example, let’s say your bookkeeper prefers to cut checks for payables early and hold them until a later point when deposits are received. If cash is reasonably tight, but healthy, the checks that were cut too soon could give your company a negative cash balance on your balance sheet. Keep in mind this is line one of the first impression you make with a lender and it’s saying you’re broke. Financials will also show if a dealership is earning greater profit by increasing sales or whether a dealership has experienced a loss in business. And finally, financials indicate whether a dealership has equity in the business or has experience running this type of business. Another example, assume you have contributed $500,000 to your company and your intentions are to leave the amount in the company permanently with no interest payments or repayment. If your accountant or bookkeeper records this as a liability, which they probably will unless you specify otherwise, you have painted a weaker picture of your company and not taken credit for the capital invested. Now that you know why lenders require financial statements, be sure your financials are presented in the best way possible. If you had a house to sell, would you tell a potential buyer to take a look before you have it looking its best or would you pull the weeds, mow the lawn and walk through the interior to make sure everything looked the way it’s supposed to? The answer is clear – of course!   56 The point is to recognize that your financials are critical for lender approval and to review them for accuracy before they are presented to any outside entity. It can mean the difference between having a healthy lender portfolio to serve all of your customers or not. NATDA Magazine www.natda.org