There is no one correct structure or formula. Each financing arrangement and its structure should be tailored to meet each company's specific financial situation. There are trade-offs and flexibility in structure and pricing alternatives. The most important factors in any banking relationship are good management and communication. Confidence in management will allow the bank to be more aggressive in its risk tolerance.
Good communication is key.
If the company is having a problem, the banker should not find out by reviewing the financial statement. It is a good idea to periodically prepare an overview for the banker of how the company has done, including financial performance, major issues, contract awards and the firm's outlook. This will allow the banker to be proactive and add value to the process, offering suggestions as to how the bank can assist the company in achieving its financial goals. Evidence of sufficient accounting support and systems to provide accurate and timely information are critical to the bank. This allows management, as well as the bank, to monitor financial performance and enables management to respond and plan accordingly.