Using the bank to arrange business finance

The time when you could walk into a bank, see a bank manager, tell him (in those days it was a him) what you wanted to do, tell him how much you needed to borrow and walk out knowing you had the money, are long gone unfortunately. 

These days if you want to get money out of the banks you have to do your homework. The main things the bank will look at are: 

Security: The banks are risk adverse now and it is very difficult, but not impossible, to get a loan without security. Your home is a good place to start and the banks will generally lend up to 80% of its value, commercial property lending ranges from 50% to 65% depending on the property offered. Anything else will more than likely not be acceptable to the bank. 

Debt servicing: If you are in a start up business or can't provide historical trading figures you will find the banks unwilling to help you. Ideally you should have the last 3 years profit and loss, current monthly trading figures and projections going forward for approx 18 months. Interest cover of approx 3 times or better would be good for the banks. 

Experience: You should always provide your CV. 

Credit History: Have you got a clear credit record? 

Business plan: You should have prepared one of these and be prepared to talk through it if you get a chance to discuss it with a banker who can approve your loan. 

The above covers the major aspects of applying for a loan. I should point out that the banks would give you more attention the greater the amount of money you want to borrow. If borrowing under $50k you will probably be dealing with a 0800 number and your application will be sent away. $50k to approx $200k you will have a real person to deal with but they probably wont have any discretion to approve your request. Over $200k you should get looked after very well. 

This article was supplied by David Weusten from Financial Service Providers (www.fspnz.com) 

For help in securing business finance at the best possible rates.

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