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How to approach the bank – Top Tips

Andrew McGeorge, Commercial Business Manager,Clydesdale Bank

Andrew McGeorge - Clydesdale Bank

by Andrew McGeorge, Clydesdale Bank

2013 saw confidence returning to the business marketplace; according to Clydesdale Bank’s own research an estimated 86 per cent of businesses planning to invest this year.

So how are you going to achieve that? Here are a few suggestions on how to approach your bank to agree the funding options required to support your initiative.

  1. Pitch and Tone – “Keep it simple.” An over-elaborate plan or pitch can distract from the key points you really need to make. The way you present your case does reflect on you – you want to give the audience confidence that you know your business and can deliver what you say. Have a clear strategy in mind and make points that link to the key activities of the business.
  2. Who knows the Plan? Prepare for the meeting properly; be clear on what your objectives and goals are for the business in the short and long-term. If you have a business plan, bring it. It is best when the people that know the plan and the operations are present to explain and clarify any points - the bank is looking for key people to demonstrate that they are fully engaged and committed to delivering the plan, both historically and in the future. Provide cashflow forecasts, costs and any assumptions, to illustrate why you need the money and the amount requested, and how any loan can be repaid over the businesses’ preferred term.
  3. Where, What and When – Agree a clear agenda with the Bank beforehand about what you are trying to achieve at a meeting. Ensure that all key sites can be visited and key people are available. Financial information provided beforehand will deepen the conversation.
  4. Risk Management or Sales Pitch? When presenting your suitability for funding, you have to strike the right balance between the positives and demonstrating you know the risks and limitations of your business. An internal view of the business’ capability should be presented together with a perspective on the key external factors. (Porter’s “Five Forces” analysis is good way to assess these) The bank will take comfort from a management team that can make an honest assessment and articulate these clearly.
  5. The Numbers – Have your most up to date annual and management accounts, and be in a position to articulate trends, for example sales volumes, margins, overheads and drawings policy.
  6. Life Cycles – Show that you are aware of where the industry life cycle is currently, where your business has reached in its own life cycle and where the main product/ service sit within its own life cycle. Demonstrate how these are managed and what actions will influence opportunity for the future.
  7. Open Mind – Don’t go in to the meeting with a fixed idea of what you need – be open to all types of finance options and structures. Be clear on the businesses’ asset conversion cycle; what you are funding and what will repay the funding. It is better to align your funding to the assets deployed to repay - focus on the key contributions.
  8. Agreeing the price – The pricing of any borrowing should always be a full negotiation with both parties achieving agreed terms for the business. The cost will reflect the risk, loan size and term of the borrowing and should reflect your specific circumstances. 
  9. Initial and On-going Terms – If there are conditions to be met to access the funding, and for the on-going monitoring of repayment vehicles, these should be mutually agreed at the outset. Agree the key items and discuss and agree others for consideration. Again these should be clear and achievable both immediately and throughout the term of the facility. 
  10. Keep Talking – The best relationships are where the communication is regular and two-way. Its best when it’s planned, agreed and focussed to suit the business events throughout the year. This creates confidence within the partnership and eases the route to further support. 

Following these simple but effective tips are likely to improve your discussion and help reach the right decision for the business. So here’s to a year of action in 2014!

Subject
Finance