3 mistakes to avoid when looking for Bank Finance
A scenario I hear constantly is that of the ambitious entrepreneur or fast-growing business that has great plans, all needing finance. Despite the emergence of alternative forms of raising finance such as Angel Investing or Crowd Funding, getting funds from a Bank is still one of the most popular routes.
However, since 2008, the Banking market hasn’t been easy. Companies and Individuals alike can give themselves a head start by avoiding a few common mistakes:-
Mistake no. 1: Don’t ask for the moon when they can only offer you the stars.
Set realistic expectations and work out what you actually need. It may sound obvious but I often hear Bank Relationship Managers saying clients just aren’t realistic about what they are asking for, “It’s almost if they feel the process is so tricky, they just want to see how much they can get”. The Banking market is notoriously tricky, regulatory changes mean that it is harder to get approved facilities than it was 10 years ago. As such, it is imperative that you are realistic about what you can borrow.
Work out what you need the money for, how much you need and build in a realistic buffer to cover project delays, working capital issues or additional bills and fees.
There may be a range of products that meet your needs and a variety of ways of structuring your Facilities so that you can pay these back at a pace that suits you, but be clear about what you need the finance for and be realistic.
Mistake no. 2: Don’t be ill prepared. Do your homework.
You wouldn’t sit an exam without doing some work first, would you? Trying to get Bank finance is the same. Ensure you have up to date financial data that shows how your Company is currently performing. If you are looking for finance for future projects, prepare a business plan and forecasts to show how you expect the project to have an impact on your business. Banks make decisions on the basis of this data, so be well prepared.
Mistake no. 3: Don’t leave your internal housekeeping on the “TO DO” list.
As the level of regulatory bureaucracy in the Banking world increases, it is all the more important to ensure you give yourself a head start. Ensure Banks have a good perception of you by verifying that your Shareholders’ Register, Articles of Memorandum and other Company documents are up to date at Companies House. Ensure accounts and corporation tax returns are filed on time and that you have the right advisers to support you.
If you keep all 3 in mind when seeking Bank finance you will give yourself a great chance in getting that finance. If you require further advice on seeking Bank finance please contact the team here at Forward Financials.