Bank Loans…What is the New Normal?

Those of you that have applied for a business bank loan recently will know just how challenging the process is now compared to say 5-10 years ago. Gone are the days of “Hey Little Johnny banker, can I have a big pile of money please for this, that, or the other?” “Sure, no worries, just sign here.” The volatile economy, both domestically and internationally, has sure put an end to all that fun.

No use fighting it. It is the new normal. I was talking to a client the other day who was frustrated with the banks changing their policy after they approved the loan. Be careful. If the banks get spooked and change their policy internally they can freeze your funding or pull the facility you have in place!

So what can you do?

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If you want the money then you have to play by the new rules. And the new rules are; the applicant that presents as organised and ‘business-like’ is the one that will get the goods. The trick is to give the banks what they want before they ask. Don’t just walk in there with your hand out, paint them a picture so convincing they can’t possibly knock you back. Having a great bank manager now is not enough!

Your ‘funding proposal’ should include all the quality financial information a bank would ever need to see to make a funding decision. Give them 3 years of financial statements, tax returns, BAS’s, and current ATO portal reports. Give them current year management accounts, cash flows, budgets, and forecasts for the next couple of years. Show the bank you know the financial side of your business inside and out.

By the way, ‘quality’ is in bold for a reason. Rubbish financial information tells the bank you can’t manage your own money. Why on earth would they give you some of theirs?

Your proposal should also tell the story of where your business is now and where you’re taking it in the future. Demonstrate that yours is a quality business that’s going places and deserves their money to help it get there. And importantly show them how the borrowed funds will increase the profitability and value of your business.

If you’re serious about wanting a business loan then get serious about the application process. Don’t give them a reason to say ‘no’.

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