How To Obtain Finance And Negotiate A Better Deal From Your Bank
As a small business owner there may be times when you need additional cash flow. This might be to pay some outstanding bills, purchase stock or new equipment or in planning for the growth and expansion of your business.
The additional cash injection can come from existing reserves from the business or personal contributions. Often what is overlooked is an approach to your bank in the belief that it may be too hard to arrange finance. Most business owners believe that banks are not likely to lend to a small business likes theirs or there is too much paperwork to fill out. While in some instances this may be the case, there are a few things that you could do that will not only make it easier to arrange the finance but also to get a better deal.
For example, before contacting your bank have the following information prepared:
- A strategic or business plan that provides clear objectives, time lines and action plans for the future.
- A properly prepared set of financial reports, budgets and a cash flow forecast that accurately reflects your business objectives.
- Details of any seasonal factors where your business may have a decrease or increase in turnover and how you will manage these variations when they occur.
- Details on how you manage your debtors and an effective debt collection process. For example, if you have 14 day terms do you generally receive payment on time or do you have a poor collection process where outstanding payments take considerably longer to receive or are written off.
- Details on when you pay your creditors, whether you pay on time or let them build up which results in large amounts that are overdue.
These are just some basic points to assist you although there may be other points depending on your business and what you need the finance for.
When the bank assesses any application for funds one of the main criteria they are focussed on is the level of risk. The benefit of having this information is that it raises the level of confidence that the bank has about lending you money which can result in you being able to negotiate a decrease in borrowing costs as well as a slightly lower interest rate. If you need assistance preparing this information why not give us a call on (02) 9997 5662 so we can help you prepare this information.