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How to Get the Best from your Bank – Top Tips for SMEs (Part Two)

Last week we took a look at ways in which SMEs can get the best from their banks when it comes to managing cash flow and wider financial affairs. This is an important issue for small to medium businesses here in the UK, especially in the current economic climate when we’re facing uncertain times financially due to the surprise Brexit vote returned by the electorate in the June EU Referendum. Today we’re taking things a little further with some advice on how to get the best out of your bank if you’ve received bank finance. One of the most important responsibilities you will have is to keep your bank fully informed of any major changes to your business finance forecasts or any significant events that are relevant to your business dealings. Finance providers like things to be stable and steady and this is especially important when it comes to your business finances. Finance providers don’t like surprises so keeping your bank relationship manager in the picture when it comes to any major events (for instance receiving or losing a big order). If its bad news that you’re delivering to your finance provider, then try to ensure that you do have some sort of positive news to impart as well in order to lessen the seriousness of the situation. Be prepared to answer questions on the impact of the event on your business cash flow and profits. There are occasions when bad news such as losing a major order may have a short term positive impact because less working capital may then be required by your business. Any bank (or other finance provider, for that matter) will wish to review the financial facility at regular intervals – often on a quarterly or annual basis. You’ll need to be fully prepared for these meetings and look at the finance facility from the bank’s point of view. This means you’ll need to consider the following questions: • Has your business been meeting the planned repayments in a timely fashion? • Is the security you offered still worth as much as was originally stated? • Is the financial facility adequate for your business needs? • Will you need to increase the finance (or seek alternative means of finance to work in conjunction or replace the facility)? • Are the forecasts of your future trading robust enough to inspire confidence? • How would the bank react to a request to share security with an additional finance provider if this becomes necessary? Even if the finance you’ve received seems adequate for your business needs, it’s a good idea to maintain contact with alternative finance providers to ensure that the current financing is delivering good value for your business. The major banks in the UK have introduced a guarantee that current accounts can be moved to alternative providers within seven days, so switching business accounts does not present a huge problem as long as the switch is administered in an effective manner.