Business Banking Finance Tips

If you're in business, your going to need business banking finance. Trouble is, you can't always get it when you want it.

Ever wondered how all those banks can claim to be so business friendly when all they ever seem to say to you is 'no' when you most need the money ? These tips are for you.

Economic cycles come and go. Bank lending policies change with the wind. But these tips will stand you in good stead regardless.

1. Use multiple banks.

Probably the best business banking finance tip I ever heard. I cringe now when I hear people talking about how they've got all their business with one bank, especially if they start talking about 'loyalty'. Don't buy any of the hype about it being easier, or cheaper, or how they want to help with everything and blah, blah, blah.

Fact - banks regularly say 'no' to folk who've been with them for donkeys years.

Fact - what do you think happens to your $20k credit card limit if you get behind on your mortgage with the same bank? Right - they cut it. If you had the credit card with a different lender, you'd still have the back up of the credit card.

Basically, it gives you a lot more options, especially when things get sticky. You do not, ever, want to be in a situation where you are completely at the mercy of one lending institution.

Note: If you have mortgages with ANZ or National Bank, check the small print. Whilst they are at pains to go on about being separate brands, cultures, etc, you'll see that they are now actually securitising over all assets that you have with the group. So, strictly speaking these are not separate banks at all, especially if things turn sour. (Watch out for a full merger when National have to stop using the black horse logo).

2. Set up credit when you least need it.

Banks love lending money. They want to lend you money. That's how they make money. But of course they only want to lend you money when they are confident of getting it back. So, if you've got sufficient equity in a property they can secure and/or some real solid income, they'll lend you money. If not, they won't.

Where a lot of business people go wrong is that they go and ask the bank for money when they are just about to run out. This is then often compounded by the fact that they gave up the day job to start the business and the projections they showed the bank manager 6 months ago haven't quite materialised!

Think of it from the bank managers' side of the desk - no provable steady income - business still in early stage/growth mode - bigger risk for bank losing it's money.

So, wherever and whenever possible, organise maximum credit when you are in a position of strength.

If you are thinking about quitting the day job in a few months to go full time on the business you've been working at for a while, get an overdraft, increase your credit card limits, get a line of credit against your property, etc. Sort out your business banking finance in advance.

If you know your property has increased in value, get it valued and organise a line of credit then. Don't wait until the market is in a down phase of the cycle.

Bottom line - you can never have too much credit, especially if you're self employed.

3. Plan Ahead

Finance is one of the most vital aspects of any business. At the end of the day, it's about making money. You may have done a good business plan. You may have included a thorough cash-flow forecast - all very important. But have you thought through your plan for approaching lenders for funds ? Do you know when a certain mortgage rolls off it's fixed term ? Do you know what information the bank would need to allow you more facilities?

Think and plan ahead. Have contingency plans for when things don't work out the way you hoped. What's plan B?

Timing can be very important. Perhaps you need some short term finance to get you through two or three months until you can show your accounts that state a solid profit ? Maybe you need to give yourself a month to investigate alternatives and build up new relationships with potential funders?

Whatever your situation, planning ahead will definitely help you get more business banking finance.

4. Learn the rules of each bank.

The one piece of routine bank advertising that's actually correct, (the exception to prove the rule) is that all banks are not the same. Of course, in some ways they are, but there are actually many differences, some quite significant, in lending criteria. Keep up to speed with these as much as you can, particularly in areas that directly affect your business. They won't necessarily advertise these changes, so it pays to ask a lot of questions and gather as much information as you can.

5. Build Relationships

When a bank manager is considering whether or not to lend the bank's precious capital to you, he's broadly looking at three things - security, ability to service the loan, and you as an individual.

OK, more and more these days, business bank managers seem to be doing everything by numbers. Less discretion, more rule book. But there is always some leeway, information can be interpreted in different ways. (You can do almost anything with numbers if you want to). So, the better your relationship with the bank manager, the more confidence they have in you, the more likely you'll get that little bit extra, or a bit of flexibility on your limits,etc.

Just don't get seduced into thinking that because you have a good rapport with a particular bank manager that they will always say yes to you. Also, don't feel obliged to stay with a particular bank 'man and boy'. It's a business relationship.

6. Stagger multiple mortgages

If you have several mortgages, whether with one bank or more, stagger the maturity dates of the fixed terms. Firstly, this will protect you against severe interest rate fluctuations. Secondly, you'll always have something not too far from maturity. This will give you something to play with for your next move.

7. Communicate

Last, but by no means least - communicate.

How do you build relationships, find out what the rules are, get to know a new bank, maximise your credit limits? That's right - through communicating with the bank.

Even more importantly, if things start to turn sour, if you can't make those mortgage payments or you keep going over your overdraft limit, you must communicate. There are usually ways round things and different options available. If you don't communicate, though, your inviting the bank to take action. And take action they will, if they perceive that their capital is at risk. Business Finance Enquiries

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