By Guy Rigby, Director & Head of Entrepreneurs, Smith & Williamson

Getting funding from your bank isn’t nearly as straightforward as it used to be. If you’re an entrepreneur or growing company relying on bank finance, maintaining a positive relationship with your bank is more critical than ever.

Here are 10 ways to inspire confidence in your bank and help you get the funding you need:

1. Invest time and energy in communication. Treat the bank as an integral part of your team. Banks that fully understand your business are far more likely to be able to assist in the event of need.

2. Understand who and what you are dealing with. It’s not just your bank manager — in the current climate the credit underwriter is charged with protecting banks’ weakened balance sheets and they are adopting tighter lending criteria.

3. Focus on your key business issues, both positive and negative. A well thought out credit proposition addressing the issues which are critical to lenders is essential. It will help you negotiate better terms and pricing.

4. Take advice. In the current climate there is no doubt that banks are comforted by the use of specialist advisers who can add credibility to your proposition.

5. Be proactive with business updates. Voluntarily provide regular copies of business plans, financial projections and reports before you are asked.

6. Maintain a ‘no surprises’ policy. Build trust and keep your bank informed of any potential threats. Let the bank know of anticipated funding needs as early as possible. You need to arrange financing much earlier than previously to avoid experiencing your own ‘credit crunch’.

7. Be professional. Make sure information is accurate and plan ahead carefully for any meetings, especially when seeking or renewing debt facilities. Your presentation should be detailed, realistic, show an appreciation of the risks and how these can be mitigated. Focus on the positive but recognise weaknesses and set out actions to address them.

8. Be consistent. Provide reliable information and supporting numbers which are comparable over different time periods. Poor quality financial information will lead the banks to assume the worst.

9. Take care not to breach covenants and deliver financial information in good time, as covenant waiver fees are being enforced. Perception is usually regarded as reality, so don’t create a bad one.

10. Be realistic. As banks are trying to rebuild their balance sheets they are looking to reduce exposure, increase margins and fees and tighten covenants. Be sure that the lending structure requested is sensible and consider whether the overall circumstances may warrant price increases or changes to historic terms and conditions.

For further information, contact:
Guy Rigby - 020 7131 8213 guy.rigby@smith.williamson.co.uk

Many thanks to Greg Begley at GGW Corporate Services for his contribution to this article. GGW Corporate Services provides corporate debt advisory services to medium-sized public and private companies, including arranging new and/or increased facilities, restructuring existing credit lines, refinancing and renegotiating terms, pricing and covenants.
Greg Begley - 020 7131 4891 gb@ggwcsl.com

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