Thinking of expanding? Improve your chances of bank support.
Despite delays to lockdown-easing, business confidence remains robust as the vaccine roll out proves to be a success and there is hope that the economy will reopen later this year. Many businesses are viewing the removal of lockdown restrictions as an opportunity to expand and gain vital market share.
For these businesses, gaining bank support remains their first port of call. What can you do to improve your chances of getting it? Here are a few reminders…
Establish and maintain a collaborative relationship with your bank – ensure the Relationship team understand your business. Experienced bankers have lots of good advice to offer for free, take them up on meetings!
Produce quality management and financial information – information should be clear and timely with supporting narrative clarifying “why” as opposed to “up/down” analysis. All historic information should be up to date.
Show you have a clear strategy and you have considered current/ future uncertainty around Brexit, Covid 19 and the climate – be clear about your aspirations for expansion and back them up with well thought out plans. Be clear on your main growth drivers and produce forecasts and scenarios around them. Banks recognise that performance may suffer in an economic downturn but show them what you have done to manage recent challenges and any you foresee going forwards.
Be realistic preparing your budgets and forecasts – the bank needs to see you can control costs, manage cash flow and liquidity although any internal revenue “targets” should be more challenging.
Produce longer term financial forecasts with cash flows that incorporate your proposed debt structure. Sensitivity analysis can help prove the margin of safety if things don’t go to plan.
Be clear on your corporate structure and tell them about your team – tell the bank about their experience and successes. Provide evidence of training, monitoring, recruitment processes and outsourced expertise to strengthen your business. The bank should see that directors and senior management have clearly defined roles, that there is a designated finance role/team and in larger companies a range of executive and non-executive directors.
Show you know your market and competitors – focus on the future outlook, anticipated changes and how competitor actions will impact you. The bank needs to be confident you are proactive.
Financial data is, of course, important to any bank but your knowledge and understanding of your business and its finances, your commitment to growth, the backing of an experienced team and robust plans, systems and controls are just as key.
If you would like to discuss any aspects of this further, please let us know.
Our contact details are:
07780 336956 Raemy Singh FCA
07780 336952 Delphine Paterson FCCA ACIB
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