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Edition 310 – Funding Secured

In my e-book “How to make your Bank love your Family Business”, I talk about the fact that most businesses have limited or no relationship with their bank. That is, until such time as you need money and, well, they have it.

Recently, we were engaged in an interesting and exciting project with a client. Whilst their relationship with their bank was long standing, it was distant and there was a new banker in the mix.

Over 30 years of working with family businesses, I’ve worked out that:

  1. Most people don’t have at their fingertips the information about their business the bank needs.
  2. Most bankers have a summary list of information they need from a client – but it’s very broad brush.
  3. There’s a lot of “to-and-fro” between the client and the bank as the bank tries to build a picture of your business and your financing needs.
  4. Often, basics are missed at both ends, which slows down the process and, eventually, leads to frustration at either (or both) ends.

We’ve too had a long standing relationship with our family business client and, as it turns out, this bank. So, we knew what they might be looking for. However, in undertaking this project, we worked on one simple proposition:

“The client and the bank are partners in the next phase of business”

Not at opposite ends of the table, but actually partners. Without the bank, the business couldn’t secure funding for what will be the next 20 to 30 years of their business’ development. Without the client, the bank won’t exist. Yet together, what can be achieved where both parties achieve a great result?

Given our intimate knowledge of the business, we put together a Funding Proposal & Business Information Package that was submitted to the bank. Whilst most people think the bank merely wants to see your numbers, check out your tax returns, see what security you’ve got and make sure your existing facilities are up to date, nothing could be further from the truth. The bank wants to know your story – they want to know what they’re investing in. That usually means:

  1. They want some background to your business – where you are and where you’ve come from.
  2. They want to see financial results over a number of years – which is why it’s paramount that family business owners focus on how much profit they’re making, not how much tax they’re paying.
  3. Revenue projections for the business for the immediate future.
  4. Budgets.
  5. Who the key people are and will be in the relationship?
  6. What your future plans are? If you’re looking to borrow some serious coin, you’d better have an outline of where you’re taking your business at the least – and a strategic plan at best.

In the end, the Bank loved the package that we prepared for our clients as it helped them to get a handle on the client’s affairs very quickly. The client also loved the package as it meant that any “bank speak” in terms of additional information required was already covered off. The end result – the bank signed off on a multi million dollar loan approval.

Next time you’re thinking of finance for your family business, stop for a moment and think “how can we make this process a lot easier?” and “who can help me pitch our proposal to the bank?”

This Week’s Tip

 “My estimate is that the Funding Proposal & Bank Information Package saved at least four weeks on the turnaround of the proposal – and significantly improved the chance of success.”