In this current economic climate, many small businesses have seen a change in their ability to borrow funds from their bank.
With banks conducting careful research to determine a business’ risk factor it is more important than ever for businesses to maintain a good relationship with their bank in order to safeguard their future access to funds.
Prepare a strong business plan
This is one of the first steps to ensure that the bank will identify it as a low risk business and therefore someone they are willing to give funds to.
A solid business plan highlights the viability of the business, information about the experience and success of the owners and managers, expenses which the loan will cover, as well as detailed sales expectations.
Establishing a personal relationship
Over time, an owner establishes key contacts within their bank that are familiar with their business and financial needs. Keeping these contacts informed of any changes to the business or cash flow projections before it comes as a surprise will build trust between the bank and the business.
Knowing your business inside out
By keeping themselves updated of their own financial status by obtaining credit reports and public records, business owners will know what research the banks will obtain when deciding on the amount, if any, to loan to the business.
Learn the banking language
Understanding banking terms such as credit ratings, cost of capital and other financial drivers will place business owners in a strong position when negotiating the terms of their loans.
Keep the adviser informed
Financial advisers are there to advise and will have an intimate knowledge of bank processes. Keeping them posted of any plans or changes will allow them to better advise the business on the best course of action, and ensure that the business will continue to prosper.
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To discuss successful business borrowing please contact our expert team of accountants here at Leenane Templeton.