Ensure you have a bank and a bank manager who are capable of giving you what you want. It’s not always a good idea to keep your business account at the same bank as your personal account. Resist the temptation of the one-stop borrowing concept. You don’t invest without spreading risk, so don’t borrow without doing the same. Making it easier for your clearing bank to tot-up your total borrowings might have the potential of cutting into future borrowings.
Be equally selective about your bank manager. Each manager usually has his own personal lending limits, so find out what they are before you decide to 'employ' him. If you’re not happy with your bank manager try another branch, or if necessary, another bank.
Keep them regularly informed
Don’t go and see the bank only when you need something – no one likes to be constantly confronted with tales of doom and gloom, or even worse, thinly veiled gestures of optimism. Go and see them when you have good news and when you don’t need to borrow more money. Get them excited about your business, enthuse about it and go away without asking them for more cash.
Always sure any figures or information you present is correct and consistent. One thing that you can be sure of is that everything goes on file and quite naturally, has a horrible habit of being thrown back at you when you least expect it.
Don’t let your accountants/financial advisers do it all for you. Bankers can spot a report that has been written by a professional but signed off in your name. They want to know that you as the borrower understand and believe what you are telling them.
However, do not take the risk of trying to forecast for the bank without professional help. There is nothing which makes you look more stupid, more quickly, than sending off a profits and losses forecast and cash flow estimate, which hasn’t been reconciled to a balance sheet and which would show negative debtors in year two.
Consider what the bank wants to see
If your bank is not fed regular information, then it can only resort to what can be gleaned from your account. Bankers examine average balance calculations from your statements and also highs and lows on the account. What makes them really twitchy is what they often refer to as “hardcore borrowing” (where the account is constantly up against the limit).
What they love are wide swings from full utilisation of the facility to occasional credit balances. They also compare your company statistics with comparable Industry standards. It pays to look at the trend of your own account before you step into the lion’s den and have pre-prepared answers to the questions they are bound to ask.
Finally, at all times, try to:
- Minimise the bank’s perception of risk in lending to you
- Increase their confidence and enthusiasm to lend by promising them no more than you know you can achieve, and then delivering above forecast
- Understand what they can and cannot offer and then structure your request so that it is watertight in banking terms