This is the phrase that every accountant has heard probably more than any other in the last three years and guess what, it is wrong.

The banks are lending…but!

  • To the businesses they want to
  • For the purposes they want to
  • On the terms they want to.

So when the phrase “the banks aren’t lending” is thrown around it could be re-worded to one of two versions;

  1. “The banks won’t lend to me on the terms they used to”, or
  2. “The banks won’t lend to me how I want”.

The key to moving funding forward to is to know how banks approach lending, which banks favour what type of lending and what are the basis information requirements any bank will ask for.

Approaching a bank to lend is all about selling confidence in you and your business, as soon as you put any doubt in the mind of a bank your proposal is dead in the water.  So do your homework and at a minimum you should be approaching a bank with the following information pack prepared;

  • A simple summary of what you want the money for and what positive effect will giving it to you generate.
  • A copy of the last annual accounts
  • A copy of management accounts as up to date as possible (the last month or quarter’s results)
  • A simple cash-flow and projected accounts showing how the business will trade over the next two years.

I have heard it said that this is a lot of time and expense to go to, but remember you are selling confidence so if you do not have the basic financial tools to hand to assess and manage your businesses performance then you have put doubt in the mind of the bank.  “How will they know if the business is profitable”? “How will they spot failing trends”?  As soon as these questions appear in the banks’ minds, the deal is over.

So before you consider approaching a bank, ensure that you have things in order and if you don’t approach your accountant to help you.

This is where having a good relationship with your accountant is key as the lending manager will often talk to the accountant to get further information and more generally a better ‘feel’ of the business.  Again, we come back to confidence, as having an accountant that understands in depth what you do and how you do it will reinforce what has been provided and gives that bit more confidence.

It may be hard to believe but there are many accountants who do not know what their clients do, let alone how they do it.  We do not believe that this is the way to do business, for us the more we know, the more we can advise, which is why we invest in our client relationships as something precious to us.