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Resource Management

What is Resource Management?

Resource management is how you handle the day to day affairs of your business, including how you pay your debts, collect on debts owed to you, deliver your service or product to customers, and manage your inventory. Your proven ability to manage the resources of your business is a prime consideration when a lender is determining whether or not to approve a loan. There are a few areas in which you will need to appear strong in order to make a favorable impression on a prospective lender.

Character and Managerial Capacity

Character is the personal impression you make on the potential lender or investor. The lender decides subjectively whether or not you are sufficiently trustworthy to repay the loan or generate a return on funds invested in your company. 

Managerial capacity is another important factor. Your educational background and experience in business as well as past achievements in your industry will be reviewed. The quality of your references and the background and experience of your employees will also be considered.  

Key Ratios Used to Determine Your Resource Management Skills

Mathematical calculations on historical and projected financial statements can be used to form ratios that provide insight into how resources have been managed in the past. It is important to understand that no single ratio provides all this insight, but the use of several ratios in conjunction with one another can give an overall picture of management performance.

Some key ratios all lenders review are:

  • Debt to worth (including equity investment)

  • Working capital (how much capital you have to run your day to day business)

  • The rate at which income is received after it is earned (how quickly you collect on debt owed to you by others)

  • The rate at which debt is paid after becoming due  (how quickly you pay your obligations)

  • The rate at which the service or product moves from the business to the customer