To monitor a company's creditworthiness, lenders like to see periodic operating statements, which usually come in the form of a no-frills computer printout. But if you want to maintain credibility as well as credit, you might take a tip from Charles J. Bodenstab, who delivers to his bankers and vendors something that more nearly resembles a quarterly, state-of-the-company report.
Bodenstab began the practice four years ago, shortly after he purchased Battery & Tire Warehouse Inc., a privately owned distributor based in St. Paul, Minn. At the time, the highly leveraged company had a net worth of nil. In hopes of buying time with creditors, he prepared for them a detailed account of the company's bleak financial situation, seeding the numbers with explanations of the various problems and what he intended to do about them. His candor, he says, helped him establish some "fairly good-size lines" of credit.
In subsequent reports, Bodenstab could point to firming sales and growing profits, but he continued to underscore the negatives, such as falling gross margins and upcoming inventory writedowns. (To his surprise, one major creditor wrote him back, offering some practical solutions.) And he plans to keep right on delivering the bad news, even if the company hits hard times. There's risk, he admits, in alerting his lenders to early signs of trouble. But he figures the trust he's established should help him ride out any storm.