Finance · 15 July 2015

The best approach to borrowing from the banks

It pays to have your numbers in order first

It’s fine not to have all the answers before you approach your bank as that’s what we’re on hand to help with, but there are a number of things you can consider in advance to get the best possible service, while arming yourself with sufficient knowledge to get to the next step.

(1) Plan to succeed

Firstly, make sure you have a robust business plan and a clear sense of what’s driving your business and which elements are proving most successful, as it’s these areas you’ll want to capitalise on. Your lender will certainly want to know more about the success rates of your business and why you believe there’s room and rationale for expansion. Equally, you may decide to reduce any less profitable areas that may be holding you back, even if that means narrowing your focus – ultimately you need to demonstrate you understand your market.

(2) Proof your plan

Your plan doesn’t need to be pages and pages long; keep it succinct and simple. And, remember presentation is key – that applies to both you and your plan. Make sure you proof read your plan and correct any typos or grammar mistakes.

(3) Deliver on the detail

Secondly, be prepared to discuss in detail what you want the funding for and how that will support your business plan. Do you need working capital to support management of your cash flow; is it investment funding you require to buy the asset you need to grow your turnover; are you looking to purchase new premises? Show you are clear on your request and be able to demonstrate how the funding you need will help your deliver your business plan.

(4) Support your application

Cash is king – prepare as much as you can to show how you are managing it – historic cash flow statements and projections will help support any application that you prepare.

In addition, bring as much other financial information as you can reasonably bring – income statements / P&L and balance sheets all add important colour to your business and how it is performing. Being able to explain them – the reasons things are going well or have been difficult in the past also shows how well you know your business.

(5) Open up

Don’t hide anything – if you have gremlins in the past, bring them out and talk about them and what has changed. Give the lender comfort that you have learnt from any mistakes and if possible show them what you are doing differently. These conversations are always more positive than the lender finding issues out themselves through the credit checks they carry out. Being up front shows honesty; hiding things makes lenders question everything you are telling them.

(6) Stand behind your business

Finally, be prepared to stand behind your business and demonstrate how you have done so in the past – lenders will all want to know what skin you have in the game and how committed you are to the success of your business.

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ABOUT THE EXPERT

Richard Saulet is director of Metro Bank Invoice and Asset Finance. He heads up a team of 100, who look after all aspects of Metro Bank’s SME offering including distribution and operations. Prior to that, he was commercial director at Virgin Money and held a number of senior roles at RBS.

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