Is it time to visit the Bank?
Visiting your bank is often like visiting the dentist:
• You need to go yearly but you delay it for as long as you can
• Your past sins are obvious as soon as you open your mouth. They can be even worse when the dentist digs a little deeper and does an x-ray!
• The feeling of an unknown outcome – will you get the all clear?
• Feeling like you can’t get your point of view across even when they ask you questions
• The expensive bill at the end of the visit
• The ongoing maintenance and review so you don’t lose all of your teeth.
Imagine if you went to the dentist knowing that you had no fillings to attend to. You could even shop around for the cheapest deal because you know no further work is necessary.
There are many reasons why you may need to visit your friendly bank manager:
• Your annual review;
• To increase your working capital debt levels;
• To buy a new asset;
• To acquire a new business;
• To get a better deal;
• To get better service;
• To restructure your finances.
We can help you to visit your bank with confidence.
The Funding Requirement Report
We have developed a Funding Requirement Report that will present your business in the best light possible. We use the same tools the bank will use to assess your business.
We work with you to prepare a report that will allow you to:
• Explain to the bank what you do, how you do it and why you are good at it;
• Provide copies of your accounts, tax returns and any other documents the bank may require;
• Get on the front foot about your past results;
• Explain to the bank where you are going;
• Explain to the bank what you want;
• Shop around to make sure you get the best deal.
Getting funding can be tough in the current climate
Victoria University, in collaboration with the State Chambers and ACCI, recently completed a survey looking at business issues around access to finance.
The survey found that access to finance has been a significant issue for small businesses since the Global Financial Crisis (GFC). Around a third (34.5%) of small businesses has sought external finance in the past two years to fund business expansion. A further 18.7% would have sought finance for expansion, but did not do so because they believed their application would be unsuccessful.
Of those that had applied for finance to fund business expansion, 48.7% had been unsuccessful on at least one occasion, and 18.6% had been completely unsuccessful in all attempts.
The most common reason given by the lender for refusing an application was insufficient collateral (42.9%), followed by the lender believing the business was too indebted (32.2%). Of those who had failed to secure finance, 29.0% had a relationship with the lender which was more than ten years old.
Small Business is paying a premium
Over recent years, the cost of funds for small businesses has increased significantly.
Prior to the GFC, the spread between small business interest rates and the cash rate was around 200 basis points, but the spread has since doubled to more than 400 basis points, with a significant spike following the collapse of Lehman Brothers in the second half of 2008.
While credit conditions have stabilised somewhat since then, the spread on small business loanshas remained at around 400 basis points since November 2008, and in fact has increased further to 425 basis points following the Reserve Bank’s decision to increase interest rates last November.
What are the Banks looking for?
Depending on why you are borrowing, the banks are looking for different information:
Borrowing to buy property:
• Market Value of the property you are acquiring;
• The rental returns the property will deliver;
• The equity you or the business can inject;
• The cash flow from you and the business to support the lending;
• Current Insurances.
Borrowing to increase business debt levels:
• Past business performance and explanation of any one- off transactions affecting the result;
• Details of future business performance, well documented and explained;
• Documented reasons for requiring further funds;
• Management credentials;
• Industry confidence;
• Owners equity positions;
• Current Insurances;
• Interest Cover, Debt Cover and Lock up Ratios;
• Asset Value.
The Banks like it
We have received many comments from banks regarding the Brentnalls Funding Requirement Report including:
“It was nice to see a client well prepared for the meeting – we wish other clients would come to us so prepared”
“This report really helped me to present something tangible to the credit department to try and get the deal over the line”.
So don’t avoid your bank until you have a cavity. Let Brentnalls WA help you to approach your next visit to the bank with confidence.