The difficulty is that while the big banks are surely creating enemies with their policies on business credit lines and credit cards, their unwillingness to lend and their poor customer service, the small regional banks are failing at an alarming rate. Credit Unions are not a viable alternative for most folks because their charters restrict how much they can loan to business – I’m told it’s something like 12.5% of asset value.

I moved to California in 1991 and the company I joined was using First Interstate Bank. Since I was new to the area, and because there were some benefits of banking where my company banked, I chose to open accounts at First Interstate. Five years later (1996), First Interstate Bank was purchased by Wells Fargo and I’ve been with them ever since. Their service has been very good. In 2002, I started my own company and Wells Fargo was very generous in setting up my accounts and opening an unsecured line of credit for the company. My needs are modest and I do most of my banking on-line or at ATMs. I rarely have to go into the bank, and when I do venture in, I’ve always received excellent service.

If I had need of a large liner of credit and if I had a decent balance sheet, P&L and cash flow, I might well shop things around just as I advise the business owners, company presidents and CEOs in my network. I definitely would be more careful to vet my bank prospects before committing. In the present state of financial institutions, I believe sticking with the “too big to fail” guys might be better than it used to be. Don’t get me wrong, I think the big banks are in a lot of trouble too, and they have used all their political might to thwart any attempt to keep regulators from curbing their bad decision making process.

So at this point, I don’t think the small banks are any better off, nor are they lending more money than the big guys. So if you can put up with what is usually bad service, you might be better off with one of the bigger banks until this all settles out. There are, of course, exceptions to this generalized statement. Joseph Stiglitz, over at Harvard Business Review, put it this way:

In the end, the financial system failed to perform its key roles: managing risk, allocating capital, and keeping transaction costs low. – HBR, March 2010, pg. 36

Useful links for finding out how your bank is doing are: BankRate.com, and TheStreet.com. I’m sure there are plenty more, I haven’t fount them all! The bottom line on this is that the banks are all in trouble. They have done a fine job of gaining political advantage even as they mismanaged financial capital. So I end with questions, as usual. Are you looking to secure a new or increase an existing Line Of Credit? Will you be shopping your business around to regional banks?

I’ve also observed the opposite to be true. Bad financial advice can starve projects and keep the company from growing. Or perhaps the advisor allows the opposite problem of over leveraging a company to the point of collapse. Overly cautious legal advice has kept companies from entering markets or angered customers with complex, legalistic one-sided contracts bordering on or actually achieving purposeful obfuscation.

This topic comes to mind because several opportunities to recoup cash from “Uncle Sam” have more or less been shot down by finance people as being “too risky,” or “inviting an audit.” Yet, from all that I can figure out, there is little or no risk involved either by inviting an audit or by doing something that is illegal.

The first opportunity is to properly take advantage of Cost Segregation for those of us who own commercial buildings. Even if you’ve lost your building in this economic slump but have owned it for two years prior, you may be able to regain some tax money. The professional with whom I spoke about this process has been doing this the right way for his clients for more than 20 years and has yet to have triggered any audits. That’s because they do it right with a formal cost segregation engineering report. Slam dunk if you meet the criteria. If you’re interested, here’s a worksheet.

A second opportunity is to make sure you take advantage of every possible R&D Tax Credit that you can. This one is a bit more aggressive, yet even Senator Grassley is suggesting that business leaders should take advantage of these tax breaks. One company with whom I work has a whole department of legal and tax experts to make sure they take advantage of every possible legal tax credit they can get. Now maybe you can’t afford to have a staff of folks to help you out, so you may need to hire an outside firm to work with you. There are several firms that do this kind of work. One that I am familiar with is alliantgroup. You may want to see if you are entitled to some tax credits. If you do any process or product improvements or are in an enterprise zone you may well be eligible for credits. And even if you are posting a loss this year, you may be able to get credits for prior years or set things up for going forward when you will once again earn a profit.

So if you think it would be worth your while to send as little money as possible to the folks in Washington DC, then you might want to get your financial expert (CFO, CPA, Controller, tax accountant, etc.) to look at this – seriously and thoroughly. If they do not have a sound BUSINESS reason why you can’t or shouldn’t take advantage of these tax breaks, then perhaps it is time to reconsider whether your advisors are aligned with your risk tolerance and desire to grow your business. On the other hand, if you and your advisors are “in tune” with each other and they give you solid reasons for not taking advantage, then by all means we should take their sound advice.

So where are you on this concept? Do you believe those advising you understand your risk tolerance and advise you accordingly? Do you feel you are being aggressive enough in your taxes?

The training revolved around a fictitious company with six divisions and, coincidentally, there were six groups of Vistage Business Advisors to act as Tiger Teams to come up with a plan for each division in order to “make the bank comfortable with a plan to get better and be an ongoing, thriving concern.” I’m happy to say, after poring over the financial statements, comparing our company to the industry, arguing about best approaches, scrounging for cash to get back in covenant, agonizing over a realistic plan and explaining to “the bank” how it will be executed, the bank was willing to leave our loan in place and work with us to keep the company solvent and to also return to profitability.

Along the way, I learned a great deal more about how to understand the company financial statements beyond simply knowing what was on them. I learned a good deal about how to analyze what was presented and make some decisions about what might need to change in the company to make things a bit more positive for the creditors.

The wonderful thing about our Advisor community is that we create a safe place to be vulnerable. There were many of us who admitted to needing a refresher on the financial statement basics. There were no questions too basic to ask. There was no laughter at someone, only laughter with others who were all in the same boat and willing to help each other learn.

The other discovery I made was how many of our Vistage Member Companies have the same lack of knowledge concerning the company financials. In my own group I have had the horror of working with a new member who was totally surprised at the terrible condition the company was in with regard to its financial position and the bank covenants. The company will be saved, but it will be with new owners now. There should never be surprises like that.

So I left with a renewed sense of urgency in making sure the Executives I advise are paying attention to the numbers. It’s not that hard. We can be a family or relationship oriented business and still pay close attention to the financial statements. We can question our CPA and/or controller/accountant to be sure we know what is going on. We can run our companies by the numbers and still be compassionate and care about our employees as though they were family. They aren’t mutually exclusive; yet many business owners treat financials as though they were some dark art that only their CPAs know about.

What I re-learned in this training (it’s been longer than I care to admit since I earned my MBA) is that we have no choice now but to knuckle down and get control of the numbers. We no longer have the opportunity to paper over our sins with more revenue. So we had better tighten up the ship and make ourselves comfortable with the Balance Sheet, Income Statement and Cash Flow statements. Having a balance in the checking account is NOT, by itself, indicative of a healthy company. And when things turn around, will you make the mistake of growing yourself out of business? That happens when you don’t understand cash flow.

What’s your honest opinion of your own expertise when it comes to understanding your company financials? Whether the owner, a hired Executive or someone serving in the “C-Suite,” you need to be more than just casually interested in the financials. Even if you have a staff of financial people in your employ, you need to know enough to ask penetrating questions. Otherwise, you will be completely at someone else’s mercy. The public company CEOs know they can no longer be so sanguine. Sarbanes-Oxley has made it abundantly clear, as CEO, you own the financial statements. The CEO/Owner/President owning the financials is also best practice for Private companies.