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Getting the right loan with the right bank.

Whether a CPA firm is seeking new financing or refinancing existing debt, it is never a bad time to review its banking relationship and investigate new opportunities. Careful determination of the criteria important to the firm is necessary to properly evaluate each bank. The checklist below not only will help prepare firms for the review process, but it should expedite the bank interview while maximizing the firm's banking options.

PREPARING FOR THE INTERVIEW

* Select three banks to interview.

* Establish what the financing needs will be and how the funds would be used.

* Determine desirable interest rates and repayment period.

WHAT TO INQUIRE ABOUT DURING THE INTERVIEW

* The bank's knowledge of the accounting profession.

* The amount of financing the bank will provide.

* Cost of financing, including repayment terms.

* Various bank services and pricing of those services.

* Possibility of developing working synergies as a way of establishing sources of new business referrals.

* Bank technologies, such as online bank transfers and balance information and overnight investing.

* Personal loan and other executive banking privileges available to partners and other key executives.

* Requirement for owner's personal guarantee of firm loan.

AT THE INTERVIEW, THE FIRM SHOULD SUBMIT A COMPREHENSIVE PACKAGE THAT INCLUDES

* An introduction of the firm, including its size and structure, and a listing of its owners and decision makers.

Include a copy of the firm's brochure.

* An outline of the firm's banking needs, including dollar amount of each type of financing required, working capital line, term loan and requested repayment terms.

* A cash flow summary of the expected uses of new financing.

* Cash- and accrual-basis income statements and balance sheets for each of the past two years.

* Cash flow statements for each of the past two years.

* Budget and cash flow projections for the succeeding year.

* Current-aged work in progress and accounts receivable.

* Billing rates for various stratified levels of owners and associates.

TOM POLICANO, CPA, is an audit partner of David Berdon & Co. LLP, an accounting firm based in New York City.
COPYRIGHT 1996 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:accounting firms
Author:Policano, Tom
Publication:Journal of Accountancy
Date:Apr 1, 1996
Words:330
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