An occasional series offering a peek behind the scenes of your business’s most important partners.
Wendy Trincas, expert on small business issues at Paul Beare Ltd, explains why it’s important to get your timing right.
“It may sometimes seem that banks are faceless corporations with little feeling for the challenges your business faces. Despite their insistence on the importance of relationships and their commitment to their customers, many business owners see indifference and a lack of understanding instead.”
However, banks are run by human beings and they are aware of the issues you as business owners will face. They can see the headlines, they know the challenges of growing a business in an economy like this one will face. So while those making credit decisions on behalf of your bank want to help you grow, they are also tasked with managing the bank’s exposure to risk.
So how can you present the best possible side of your business to the bank?
One good tip is to think about your timing. It is worth applying for facilities after a productive 3–month period.
What does that mean in practice? Well, if you’ve just come off a run of three flat months, where perhaps you’ve been building up your client base at the expense of sales, or aiming to reduce costs, then it’s unlikely that will wow the bank.
It may have been a tough few months that you are proud to have navigated, but for the credit manager at the bank – who has many similar businesses to consider, remember – it may look like you’re simply keeping the lights on. And while banks value good housekeeping and a well-run company, when important decisions come around about lending money, they are just like the rest of us.
Banks work in cycles, and they understand that your business is the same, so think ahead about when you will look your best: are your sales buoyant, did you get those new contracts signed, are your debtors paid off and is the next quarter looking good? They want to see a business that is reporting its sales on the increase and a more of the same to come, as part of a reliable forecast.
Remember, banks have to maintain their risk profiles carefully, so if you can demonstrate your risk is lower then you’re already hallway there. Ultimately there are no longer any brownie points for loyalty, so you have to put on your best face to get ahead, so think carefully about your… timing.