At present, the majority of bank lending is for property investments. Banks are saying this is where the demand is. Bank lending for property is easier than lending for small businesses.
To have a successful relationship with your bank, you should consider implementing a bank strategy, including preparation of a budget and cashflow forecast, which indicates that you have a profitable business and the ability to repay the loan. Prior to approaching the bank, it’s a good idea to think about what the bank’s questions are going to be and formulate your answers. These questions might relate to previous discussions you’ve had with the bank. Other potential questions include:
- Are you running a profitable business?
- Do you have the cashflow to repay the loan?
- What security are you offering?
- How are you running a sound business? To be able to convey to the bank that you’re doing this within your business, you should be able to show your banker that you’re doing your homework on your customers, that you have an appropriate debtors’ management system, you might insure your debtors.
- Does your staff have adequate training? Are they able to make day-to-day decisions?
- What is your relationship with the ATO? Are you in arrears or are you up to date with them?
It’s also a good idea to find or build a ‘cashflow buffer’ within your business, so that you’re able to negotiate the difficult conditions, which most businesses around Australia are in at present.