By Mike DeMaio, MBA, CEPA, Founder & Managing Director, Crown CFO
Yes, and it’s one of the more common reasons owners bring us in. A line of credit is how many growing businesses smooth out the gap between paying for work and getting paid for it. When you need one, or when the one you have stops fitting, the conversation with your lender goes a lot better when you’re prepared.
One thing up front: your bank makes the lending decision, not us. What a fractional CFO does is help you walk in ready.
What Lenders Want to See
Every bank has its own process, but most are looking for some version of the same things:
- Financial statements they can trust, current and consistent
- A realistic forecast that shows where the business is headed
- A clear reason for the line and a believable plan to repay it
- Reporting on the things that back the line, like receivables and inventory, if applicable
- Healthy room under their financial covenants
- An owner who understands the numbers and can explain them
If any of those are shaky, the conversation gets harder. If they’re solid, it gets a lot easier.
How a Fractional CFO Helps You Get a New Line
1. Getting Your Financials Lender-Ready
Clean, timely, accurate statements are the foundation. A CFO makes sure your numbers are reliable and that you can explain what’s in them before the lender asks.
2. Figuring Out How Much You Actually Need
Many owners guess at the size of the line. A CFO builds a cash flow forecast to show your real peak needs, so you ask for the right amount, not too little (and run short) or far too much (and pay for room you don’t use).
3. Building the Package and the Story
Lenders want to understand the business and the plan. A CFO puts together the projections, the purpose of the line, and a clear explanation of how it gets repaid, so your request is easy to say yes to.
4. Speaking the Lender’s Language
Bankers think in covenants, coverage, collateral, and risk. A CFO can talk to them in those terms and translate what they’re asking for back into plain English for you. It also helps to compare terms, not just rates, when you have more than one option.
5. Getting the Timing Right
The best time to set up or increase a line is before you need it. Asking when cash is already tight puts you in a weaker position. A forecast helps you see the need coming early enough to do it on your terms.
What About Restructuring an Existing Line?
Lines of credit often stop fitting as a business changes. Common reasons to revisit yours:
- You’re close to, or have missed, a covenant
- The line is too small for your growth, or sits mostly unused
- Seasonality has changed how much you need and when
- The line is coming up for renewal
- The terms no longer match how the business operates
A fractional CFO helps by modeling your options, understanding exactly where you stand against your covenants, and opening the conversation with your banker early, ideally before there’s a problem. Lenders generally respond better to an owner who raises an issue with a plan than one who surprises them.
What a Fractional CFO Can’t Do
A few honest limits. A CFO can’t guarantee approval, and can’t make a lender offer terms they won’t. We also won’t dress up the numbers, since experienced lenders see through that, and it hurts your credibility. If the financials need work first, a good CFO will tell you plainly and help you fix it, so the next conversation goes better.
If a Line of Credit Is on Your Mind
You don’t need to wait until you’re in a bind. At Crown CFO we bill by the hour, so you can start with focused time on getting ready for the conversation. If you’d like to talk through your situation, we’re happy to listen. Contact Kerry George at kerry@crowncfo.com.