Your bank and investors care most about your cash performance. This helps them to predict the likelihood that you will be able to pay them back!
Now that you know this, you want to know how banks view your performance. If you are looking for a bank loan, for example, the banker looks at your turnover, your profitability, your growth projections, your cash flow or just the value of the security you can offer. What if the bank says no to your application? What can you do?
We are going to show you how to get the support from your bank for all your lending propositions. The good news? It is easier that you might think.
The better news? We will show you what information you need to give your bank when applying for a bank loan, an overdraft or a line of credit, even some form of asset-based lending.
The best news? We will show you how you can approach the conversation and position your case to get the best deal possible.
THE BEST NEWS EVER? We will close your knowledge gap and increase your management competence!
WHY DO YOU NEED LENDING SUPPORT
It is imperative that you understand your business from the perspective of bankers and investors, so you are not frustrated by their lack of appreciation for your business.
To avoid being seen by the banks as marginal, you must be able to CLEARLY and convincingly articulate WHY your lending proposition must be supported by the bank. This isn’t just when you apply for a bank loan – it must be each time you communicate with your bank.
We understand the pressures you are under and we have some valuable pointers for you when you are thinking of approaching the bank for that critical funding. Here are our top 10 tips:
#1 Explain your financials
Spreadsheets aren’t enough. Make sure your bank understands the business drivers reflected in your documentation. For example, what is driving your revenue, price or volume? If it is volume, are you aiming to sell same products to more people or diversify your product portfolio to maximise revenue from existing clients?
If you want to take this a step further, identify your ‘one-phrase’ strategy. In other words identify the key lever in your business model that helps you make money. Apple's one-phrase strategy is 'closed architecture', which has been the key source of profitability and a blocking strategy for its competitors. Google and Microsoft are beyond the point of no return as they will not be able to close their open systems.
#2 Talk about your future
Share with your bank your vision about your business’ future. Tell them where you are going, what your business would look like in the years to come, who is in the business. This communication builds trust, and encourages your bank to champion your company and support you on your growth journey.
Some CEOs explain their vision graphically. This provides more clarity and aligns both your team and all external people who are helping you along the way.
#3 Focus your team on cash
Cash flow is the only REALITY for the bank. This is a key part of their lending decision, so make sure it’s a key focus for you and your team too.
Start with our Funding tool. Sometimes cash is not performing as well as your profit and you can fix that. The hard part is discovering your Cash Flow performance first.
With our Funding Tool, you can identify how well your Cash Flow is performing. You can see what banks see when they assess your affordability to pay back your loan. Get the Funding tool now by clicking the DOWNLOAD button below..
#4 Borrow for growth, not wastage
This may sound obvious – but be clear about what you are borrowing for – and make sure it ties to your business plan.
A lot of businesses we come across are burning their cash on management mistakes. You and your management team need to understanding that every time you make a change in the way you run your business, you impact cash with your decisions. Sometimes these decisions are making more money, and sometimes they are wasting your money. Make sure the changes you make are contributing to making you more money.
#5 Give the bank the option to exit
Don’t back that bank into a corner. An exit opportunity is another confidence builder for the bank. If they know they can get out, they feel more like they won’t have to.
Ideally your focus should be on creating a buffer fund with the aim of becoming financially independent. There is nothing more rewarding than being able to self-finance your growth.
We advise you to have two months of operating expenses in cash, after you’ve set aside money to pay your taxes (assuming you are not using your lines of credit). If you do this, you will never feel short of cash and forced to give away your margin.
#6 Be the best in your industry
A basic business premise which has to be communicated to your bank. The better your understand what makes you the best in your industry, the more recognition you will receive form them. They will gain clarity on how and why you are the best and how you are contributing to the industry.
#7 Keep your bank informed of key industry challenges
Again – it’s a great trust builder. Be transparent and communicate regularly the issues of your industry. The more your bank is aware of the complexities your business is facing, the more relevant solution they will provide. The key is to allow the bank to give you the support you need in overcoming the obstacles.
#8 Present high level but know the detail
Don’t just talk about the figures. Being able to easily justify business case will build credibility for your #9 company.
#9 Be profitable for them – they’ll do more to keep you!
Know if you are making money for your bank or losing them money. This is obvious reason why the bank would want to have your business on their books.
#10 Treat your bank as your partner
Creating a true partnership with your bank means no secrets. The more transparent and proactive you are, the stronger the relationship. Your bank understands your business, even more than you might think. They see your cash and they know how you are doing. They need to also know the WHY and this is the information gap you will have to fill in in order to gain the best support possible for your lending propositions.
The bank isn’t just a dreaded place to visit when you need a loan. Ensure constant and transparent communication – this will encourage give and take on both sides and will create the strong partnership.
Improve your lending proposition
If you feel you are missing out on Lending opportunities for your business, or you want to improve your lending proposition – you need to see how the bank is measuring your cash flow/funding performance. The fastest way to improve your chances to get a bank loan is with our Funding tool. You can see exactly where you need to fix your cash AND it tells you exactly what to do when you find the gap.
Click on the button below to download your Funding tool.
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