Know your bank manager

Have you ever wondered what your bank manager is thinking when he looks at your financials as part of a loan application?

Your bank manager now has to enforce strict lending criteria in order to be able to lend to your business.

Now more than ever, you must have a greater understanding of some key information before you even attempt to ask the bank for finance. Firstly, you must determine exactly how much money you need. It is a lot easier if you are buying a
property, but if you want working capital, you need to demonstrate exactly how much you need and that requires evidence that you have an informed understanding of your business.

The bank requires a detailed cash flow for at least the next twelve months and preferably longer to demonstrate how the cash flow will move and what your requirements are. It also demonstrates you are in control of the business. Being
able to ‘stress test’ this cash flow to look at various scenarios and analyse the best and worst case before showing the bank increases your chances of getting access to the funds you need, and ensuring you have the ability to withstand a tough economic climate.

The next question you need to ask is what security do I have available for the bank? Property is not the only security, there are many other options. Matching the security with the right loan will give you flexibility and set the scene for future
growth.

There is no ‘one-size-fits-all’ solution as every loan is designed for a different purpose. However, there are many risks linked to obtaining the wrong loan, such as paying more interest than you need to or paying more tax as a result of your
loan not aligning with your existing business structure or security offered.

Getting to know how your bank manager is thinking can be easier than you think. Fortunity has a product that analyses your current business performance and produces a report that shows you exactly what the manager will be looking
at, which is vital before lodging your loan application. So, before applying for a loan, get in touch with Fortunity so they can prepare a business case you can present to your lender with peace of mind that you’ve given you business the
best chance of success.

By Tim Cullen, Partner, Fortunity

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