Golden rules to obtain bank credit
Almost all businesses require bank loans, but getting to it is a complex and daunting. We turned to an expert to explain how fair
Obtaining a loan is one of the most important tasks that every business owner must face them sooner or later. It is also, and one of the most challenging tasks. Working with banks, the volume of operations in the complex processes involved in getting a loan makes not a few business owners to lose sleep. Amir Bassan, CEO of management in company analysis and management of investments, dealing with money management outsourcing services, spreading heavy fog around this problem and explains how to do it correctly.
If every business needs a bank loan?
Almost all businesses require bank loans. HAGASHASHIM [NT: team of comedians in Israel] said once that “Banks are oxygen country.” In reality banks are oxygen providers, or credit, for most business. And business very “liquid” is also help , bank credit, and the more so, bank credit growth needed to finance a business or starting a business with a limited level of equity.
So how to get a bank loan?
This is a great question and the answer varies from one company to another and even from bank to bank; but there are some golden rules that is important to respect the process of obtaining bank credit – and they will expand.
Everything is based on people – knowledge and building a relationship
It is desirable to directly contact the representative who handles the business of the bank. Company description, explanation of how to operate the business and the workplace is very important to make the knowledge, understanding needs and build confidence in the company from the bank. Even if it comes to the bank they work for years, it is advisable to invite from time to time to you by one of the bankers, especially when it comes to significant credit requests.
Do not be surprised – Prepare for the meeting
It is forbidden for any of the questions banker to catch you unprepared. Bring to the meeting with a presentation orderly Bank Company, its operations, financial results, plans for next year or in subsequent years, financial projections under your plan – and, according to all their shows your credit needs and type credit required.
Not only does size matter – the difference between the loan amount and the type of credit
It is important to consider the loan amount necessary to know the type of credit requested. For example, demand loan credit type, permanent credit line or a combination of both? If it is a loan, check in advance if you need a loan for a short time or a long-term loan.
The type of credit is determined by the needs of business (finance working capital, equipment financing, termination of existing credit guarantees to tender, import finance, etc.) and the nature of the company’s activities and situation financial business. It is very important that the type of credit to match specific business needs. I saw quite a few businesses who have suffered serious cashflow problems after having requested and received a type of loan that does not fit with their activities.
Ask for more than you need
Analyze your needs and requires a permanent credit line with a slightly larger frame than the one you need. Bank really does not like to receive a request to enlarge the loan shortly after his confirmation – is a recipe to get an answer.
The bank would like to sell and earn credit. Therefore lead front of your trading system, de facto, it will try to improve their profits and reduce their risk. Manage negotiations with the bank in each chapter important part: the loan amount, loan type, scope and type of collateral, interest rates, the volume of commissions and benefits such as financial agreements.
Not always can bargain for everything. Moreover, it is wrong to small paragraph for each borough. It is important that you focus on the main points and will evaluate your situation to the bank. There really suitable alternative?
Check more than one bank
Before starting negotiations need to check if any, for you, the alternative of working with another bank or non-bank getting a loan that suits you.
It is important to prepare in advance and start the procedure with more than one bank. Even if you are accustomed to your bank now, and even if you’re happy with it, deserved to check from time to time and other banks and show your bank received offers from competitors.
Moreover, sometimes it is advisable to split the credit and work simultaneously with more than one bank. This is especially true when requested loan volume is high, or when the guarantees they can offer are limited.
Know your opponent – Learn bank interests
The other party must know and understand what motivates considerations. Bank aims to minimize their risks, earn well and know that the applicant is a business owner managed intelligently.
First banks want to keep their money and avoid a situation where investment in your business is in trouble or not be refunded.
The banker makes an idea you every conversation, trying to understand how your system works business, compare data with similar businesses in the area, monitors and analyzes reports of income you have given -and above all analyzes financial data of your business account, everything to avoid hazardous situations credit.
Through its economists, the Bank endeavors constant parameters of the business, such as profitability, ratio of equity and total assets, repayment capacity of the business, your level of liquidity and still more. According to these parameters decisions are made and questions asked about your business and the amount of credit is the bank willing to give it to you in good conditions for it.
Transparency and credibility
This is probably the most important rule in dealing with banks, both in the phases in which we request a credit cit during the current work. In all the companies Analitics accompanies them, we are very strict about transparency, and actually educate managers to behave in a reasonable manner – a decision that proved correct again and again.
Bank sees you as a kind of partner. Invest in your business and actually invests in you, so you must maintain transparency and credibility in all work processes with the bank.
Remember that banks do not like surprises. If you make a tidy cash flow and anticipate a problem you do not have a solution, talk to the bank in advance. Present data, explain why cash flow problem, the extent of the misconduct and when you expect to return to normal route. This type of dialogue will be easier to get bank support. Urgent requests “fire fighting”, on the other hand, are not likely to get a willing ear from the bank.
What is recommended not to do when working with the bank?
Do not give the bank a lien permanent, unless you really have no other choice. Is not floating lien pledge permanent or ongoing or general pledge to all assets (clients, inventory, equipment, etc.). This pledge will limit very hard to work with other banks; would always require the current bank letter of agreement. Banks tend to calculate the current value of collateral depending on various factors. In some cases, collateral value is not enough and the company is required to provide additional guarantees on the one hand, and on the other hand, it is difficult to work with another bank – and business and freezes here and there.
The whole process seems complex
It is highly desirable that a professional working with banks to lead. You have to prepare meetings in a professional manner and have held full control over the financial data of the business. Moreover, the more you know the better banking system and its laws, with both working with banks will be smarter and more economical. This is usually the task CFO [CFO] company; if you do not have the CFO, it is advisable to hire the services of a CFO from outside.