One of the worst mistakes you can make is to ask for more money than you can afford to repay.

My name is John Marder and I've been in banking for 25 years. I've seen just a few businesses make some mistakes during that time, and I thought I'd share with you some of those mistakes. Please be assured that in nine out of ten cases, the borrowing arrangements go smoothly. But if you happen to be one of that one out of ten, I thought maybe I could help.

One of the worst mistakes you can make is to ask for more money than you can afford to repay. There are two sides to the equation. One is getting the money and one is actually paying it back. You need to make a careful assessment of what your cash flow is and determine how much money you can pay back based on your current cash flow and not some cash flow that you might be able to achieve somewhere in the future.

My next comment might seem obvious, but you really can't make too big a mistake until you actually get the money and can't pay it back. Business is full of ups and downs. When something does adversely affect your business, you as the owner need to make an important assessment. Is this a permanent situation or is it temporary? I have seen more people make an improper assessment that has caused them to get deeper in debt because of an assessment that said, "Oh, this is only temporary; it's going to be better next week, next month, next quarter." And then it never got better.

Don't be afraid to be the bearer of bad news to your lender. Go to your advisors and ask them to help you devise a plan to make things better. As you get down the road and you get deeper and deeper into debt in a situation that you thought was temporary and became permanent, the penalties can get tougher and tougher as you go along. I don't want to scare you from borrowing money in the future, because of course that's how banks and other lenders make their living. Just be cautious in identifying how much you can afford, and when things do change, make the proper assessment and put a plan into action.