What Is The Reality For Business Borrowing?
Whist the current economic climate is challenging we all have to accept that business funding remains difficult to obtain.
The entire dynamic of the banks operating procedures relating to business lending has changed to an unrecognisable point and it continues to change on an almost daily basis.
No longer do we live in a world where our Bank Managers are empowered to make the decisions to help & support our businesses. Red tape, procedures and excessive delays enforced by centralised lending units now make these decisions harder to obtain and often appear to be invasive, intrusive and quite frankly unfriendly.
Without a doubt, too many loans provided in the past were approved without proper consideration to affordability and repayment ability, hence the reason that the banks tightened procedures and almost totally removed local lending authorities. Nothing wrong in that.
However this tightening has gone too far and banks are now in severe danger of failing to meet lending targets. More importantly, their service levels have dropped in the consumer’s eyes to an almost record low. The reality is that a large number of businesses would now consider moving long established banking relationships as they are experiencing what is called “perceived indifference” from their bank.
Now all the banks can publish statistics showing they are lending more money, achieving lending targets and improving customer satisfaction. Fantastic statistics and percentages are quoted in a variety of different areas to support these numbers. The reality is in the local marketplace, is it doesn’t feel like things are getting any better.
So how do you approach your bank and ask for support? We have listed our 5 top tips for you below: –
1. Ask far enough in advance for the required finance. If you need term business borrowing or structured finance, then you should allow 4-6 weeks for the funds to be in place.
2. With requests for short-term finance do not contact you bank on the day you need assistance! Whilst there may well be very valid reasons for the lack of notice, it can tend to indicate a lack of financial control in your business and may affect the decision to assist. We would suggest that you give the bank at least 5 working days notice
3. Be prepared to provide your bank with up to date information about your business. They need to understand your current financial position fully to be able to support you.
4. Be aware of all of your debts (personal & business) as the bank will want full details, including and up to date Asset & Liabilities statement.
5. Be aware that an agreement in principle is not necessarily an offer of funding. Always ask the question “Are you now in a position to offer me the funding I need and when can I draw the funds down?”
To summarise, the banking world has changed and we all must change with it. We may not like the new approach, but it will not change!
Never has there been a better time to seek a second opinion for funding. Do it yourself, appoint a Commercial Broker/Business Consultant or seek the advice from your accountant, but make sure you review your requirements at least annually.