Rob's Small Business Success Blog
As well as the tips and ideas I feature in my free weekly newsletter I will also be posting ideas and general business comments here.
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I look forward to sharing my ideas and thoughts with you.
Viable Businesses Must Not Take No for an Answer
Posted 05-18-2009 at 08:08 AM by Rob
‘Shop around’ is the advice chartered accountants are giving viable businesses seeking finance from their banks. And if you don’t like the answer a manager gives you, ask to speak to someone more senior.
“If funding requests fail, businesses should be prepared to challenge the decision,” says Clive Lewis, small and medium sized business expert at the Institute of Chartered Accountants in England and Wales. “If you don’t think the person you are dealing with understands your business or the particular problem you have, try to talk to someone higher up.”
“The banks say they are open for business and appear to be willing to lend to what they see as viable enterprises. In their terms this means having a strong, well-balanced management team; firm financial controls and accurate forecasting; a good product or service; a plan for recession and a sensible capital structure.
“A business with a good credit rating will be able to borrow a lot more unsecured than one with a poor rating. When turnover is falling, profits are falling and asset values are dropping, credit ratings go down. Banks have to put more capital aside to cover the risk of default for a business with a lower credit rating.
“The most contentious issue seems to be personal guarantees, but if the business hasn’t got sufficient assets against which the bank can lend, it’s not unreasonable for the bank to ask for additional security.”
Clive Lewis gives the following advice on how to get the best from your bank:
“If funding requests fail, businesses should be prepared to challenge the decision,” says Clive Lewis, small and medium sized business expert at the Institute of Chartered Accountants in England and Wales. “If you don’t think the person you are dealing with understands your business or the particular problem you have, try to talk to someone higher up.”
“The banks say they are open for business and appear to be willing to lend to what they see as viable enterprises. In their terms this means having a strong, well-balanced management team; firm financial controls and accurate forecasting; a good product or service; a plan for recession and a sensible capital structure.
“A business with a good credit rating will be able to borrow a lot more unsecured than one with a poor rating. When turnover is falling, profits are falling and asset values are dropping, credit ratings go down. Banks have to put more capital aside to cover the risk of default for a business with a lower credit rating.
“The most contentious issue seems to be personal guarantees, but if the business hasn’t got sufficient assets against which the bank can lend, it’s not unreasonable for the bank to ask for additional security.”
Clive Lewis gives the following advice on how to get the best from your bank:
- promote your business, its potential and its ability to weather the recession;
- speak often to your bank contact;
- have a strong management team
- have tight financial controls and sensible financial forecasts;
- model your financial needs carefully and avoid building in too much ‘headroom’;
- aim for strong control of day-to-day cash flow;
- tighten credit control and avoid bad debts;
- do not expect borrowing to be based on base rate;
- ask about the Government-backed Enterprise Finance Guarantee scheme.
Total Comments 3
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I run a small business and am getting swamped looking after my books. Anyone know a good bookkeeper in London?
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Posted 09-08-2009 at 06:30 AM by j.cole
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Take a look at http://www.acuityassociates.co.uk/bookkeeping. Acuity associates provides bookkeeping and management accounting services for small and medium sized organisations in London and the Home Counties.
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Posted 09-08-2009 at 10:53 AM by aassoc
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You have solved most of your problem by recognising that you have a problem!
Most small business owners will struggling on doing things they are not qualified to do in the mistaken belief that they are saving money; they are not! You doing the right thing - outsource your bookkeeping to the experts to free up time for what your particular skill is. |
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Posted 09-11-2009 at 01:57 PM by Rob
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