Page 28 - Oil and Energy January 2013

28 • OIL&ENERGY
Banking
today’s market. Your job as an owner and
senior manager is to make sure the banker
sees your company as a quality customer.
This may not be as difficult as you think.
For the most part, most fuel dealers have
a major advantage in that the company
has been operating in the community for
decades and generations. This is an inherent
strength but won’t carry the day with your
banker like it may have done in years past.
This is where understanding how Basel
III is driving bankers’ decisions come into
play. No, you are not going to become some
banking regulatory policy wonk. Instead,
to benefit from the current banking envi-
ronment, you will have to deliver to your
banker a well-documented operational and
financial plan and most importantly operate
and manage the company by that plan.
It is no longer acceptable to generate
some financial forecasts and give them to
the bank and stick it in a drawer and forget
about it. Your banker will need to see that
you are managing the business according to
these plans and delivering positive results.
This is why the operational plan should have
key metrics identified like, average delivery
sizes, minimum gallons delivered per hour,
and minimum gross profit margins on
service and installation work to name a few.
The financial plan should have quanti-
fied targeted profit margin by gallon or
percentage of sales for all your liquid prod-
ucts like residential variable price, fixed
price, cap price etc. Again most importantly,
the plan becomes your map to profits. Your
banker will look to these plans and your
financial statements to gauge if you are the
quality business owner and senior manager
they want to partner with.
This documentation showing you under-
stand the key components of your business
that drive profits and your ability to demon-
strate to the bank that you are running the
business according to the plan gives the bank
what it needs under the rules and regulations
to identify your loan as a quality loan.
The final step is to make a realistic
“ask” to the bank. Don’t ask banks to
fund losses! There are other capital
solutions for this purpose, like the Angus
Fund I manage. Banks want to fund working
capital supported by working capital assets,
finance new equipment and other assets.
I just finished a meeting with a bank
for a company that posted a loss because
of last year’s warm weather but needed
a larger line of credit to fund expansion
achieved by new contracts they had won
over the summer. The bank enthusiastically
supported the line increase because a plan
was presented to them demonstrating the
need for the line increase was because of
growth and not because the line was used
the fund the losses.
This was achieved by the owners of the
company presenting a plan, as I described
above, that showed the bank how they
successfully managed and controlled oper-
ating metrics that weren’t impacted by the
weather.
In working with other companies and
their banks for financing working capital
and acquisitions it was the same story.
Owners and senior managers have to step
up their game in documenting how they
are managing the business to targeted
profits. When they do that, it provides
the bank with the ammunition they need
to comply with the new rules and regula-
tions allowing the loan to be identified as
a “quality loan”. When that happens, look
out, as banks will aggressively provide the
financing you need.