When I meet corporate bankers, I ask the question that any advisor acting for Small and Medium Enterprises ('SME') would ask, albeit ironically, are they lending? I am assured that “banks are open for business” although there is not too much evidence of this when I canvass my business clients. I am not sure if this is the bank’s fault, after all they are stuck between a rock and a hard place; they are damned if they lend and damned if they don’t.
It may simply be that SMEs are reluctant to take on funding liabilities in these uncertain times.
However banks are lending to SMEs but with extreme caution so businesses need to make sure that they make a compelling case in order to borrow to fund expansion or for working capital.
One of the issues for SMEs is their lack of awareness of the options available. Many SMEs go to the bank and don't receive a positive response and so take this to be typical of all banks. What they need to do is look at other finance options or other banks.
If another lender has the appetite, the SME needs to present the best possible information to secure funding. Key to this is a credible trading history and good financial information equating to a proven track record and the ability to service the debt.
Often SME owners work incredibly hard in the business rather than over the business and sometimes maintaining good financial records is difficult. The bank needs to know that the company is well run and has its finances in order. Accurate management accounts supported by effectively presented cash flow projections will clearly demonstrate to the bank how it will get its money back.
The company’s accountant will be able to assist but sometimes it can be useful for specialist finance advisers to assist. Often these are ex-bank managers who know how to present the business information more effectively. It might be money well spent!
Please call or email Patrick McGrath with any questions on 020 7288 4707