Getting bank finance isn't easy these days - but working with your bank and cultivating an open, honest relationship with them could help. Here's how.
- Find out which individuals you will normally deal with. Meet them and aim to build a personal relationship.
- Help the bank to have confidence in your business - show them your business plan and be prepared to explain key figures and projections in detail.
- Invite your bank contact to visit your premises to meet key employees and to get a better understanding of your business.
- Use your budgets to forecast your cash flow. Give the bank as much advance notice as possible of any anticipated financing needs.
- Build a safety cushion into your financing and consider worst-case scenarios.
- Always keep the bank informed; let them know when your plans change.
- Investigate the availability of loans and other forms of finance for long-term requirements rather than relying on your overdraft.
- Consider fixed rate loans (if available) to help with cash flow planning.
- Keep an eye on your credit rating and improve this if possible to increase your chances of being accepted for loans.
- Always ask for a clear explanation of all the costs involved in borrowing - for example, arrangement fees - as well as the interest rate.
- Shop around for quotes to put yourself in a stronger negotiating position.
- Negotiate if possible - ask for better interest rates, for charges to be waived and for any security you provide (eg a personal guarantee) to be limited.
- Manage account balances; use online banking to reduce costs and increase efficiency; move any spare cash the business may have to an account paying a higher level of interest.
- Investigate whether other services the bank can provide (eg credit cards, insurance, pensions) are competitive.
- Keep your promises to the bank and be honest: provide information when you say you will, make payments when they are due, stay within your overdraft limit.
- Warn the bank immediately if you face payment difficulties to work out a solution together.
- If you're refused a loan, keep lines of communication open and ask how you could improve your future chances.
- Ask whether the bank takes part in the Growth Guarantee Scheme. This guarantees loans to smaller businesses which don't have enough security or a proven track record.
