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As a result of the fallout from the Royal Commission into the banking sector that took place in 2018, banks have had to change the way they operate. They have had to change their policies, particularly around borrowing facilities, which has resulted in changes in how they deal with their customers. Whether intentional or not, it feels like these changes have now made banks more difficult to deal with. Business Advisor, Christian Sloniec, has 3 tips on how to better prepare for dealing with banks.
One of the major changes we’ve seen has been their change in view with regard to lending money to people and businesses.
Throw in the chaos that COVID has brought over the last 12 months, especially with the uncertainty of business performance in certain industries. This has also added to the banks’ reluctance to lend.
We’ve seen that their focus has certainly shifted from historical financial data to reviewing future estimates and financial management reports. Financial statements still provide important information for banks, but they only tell one part of the story for a business. Put simply, banks are now more focused on the future earnings and the working capital (cash flow) position of a business to determine whether they would be able to finance the debt and make the necessary loan repayments. We have found this change has caused some issues with businesses who weren’t prepared for the policy changes caused by the Royal Commission.
Banks love these as they can provide them with a level of assurance of the business expectations for the near future.
Having historical data together with future estimates provides the bank with a much greater information source to be able to provide funding approvals as they can see a larger picture.
Also, budgets enable a business to track its ongoing success, against its expectations, over a given period of time.
Relationships (and maintaining positive ones) are so vital when your business requires dealing with people.
While banks themselves have certain rules and regulations to follow, having a good relationship with your bank manager enables businesses to better understand and navigate the rules they need to follow.
This enables businesses to have honest and more meaningful conversations with their banks about their requirements for borrowing facilities.
Using a business advisor has its benefits:
Are you prepared to talk to your bank? If you would like to know more about preparing to deal with banks for your business, please feel free to contact one of our advisors for a chat about where to begin.
Phillip Cross, Royce Cross Agencies
Rodney Quinn, Quinn Transport