Back to Blog
Your relationship with your banker is like your boss. Your stay on good terms with him and good times lie ahead of you. You lose his trust and the downfall begins. To borrow regularly and have your loans approved you should follow the best borrowing practises and you have come to the right article.
Borrow to repose bankers confidence
The best time to borrow money is when you don’t need it. It helps sustain a good impression on the bank as your finances are intact. This is exactly when you should make your move for the next stage of borrowings. Your chances of getting your business loan approved are much higher and you will be in a better position to negotiate terms since you don’t really need the funds right then. The worst time to negotiate a new loan is a week before you absolutely need to have the funds. As business, you always require access to a ready cash flow and this is the way to ensure you have it.
Borrow what you need
Know what you need and borrow accordingly. Why? Because it’s difficult to separate the true necessities from the excesses in a business context–especially when you are focused more on the getting of the loan and not so much on the repayment. Get a clear-eyed, practical view of the uses for your loan, including a realistic method and timeline for repaying it. This will bring your needs into focus, divorced from those attractive wants.
Building a rooftop deck for your restaurant? Expanding your pharmacy into an adjacent space? Buying more inventory for the upcoming season? Make sure you get several quotes for the work on whatever it is you’re preparing to do and then build an additional 10% to 15% on top to get a truly realistic number. Delays happen. People sometimes don’t come through. Cost overruns are part of almost every project, so be realistic about the scope and expense of whatever your growth plan entails. Allowing for unintended or unforeseen expenses is smart business.
Gain your banker’s trust
You have to build a fiduciary relationship with the bank. For the bank to lend you a substantial loan amount in times of the company’s stress, it needs to trust in you and in your ability to repay. Without trust, your banker can’t put money in your hands.
Keep good records and report properly. Bankers do not like late reporting packages, inaccurate information or reports that change without a good reason. Your banker needs to trust the information you’re giving them. Give due regard to the accuracy and reliability of your reports.
Prepare for the worst
It is always important to have sufficient cash balance in your account. Bankers want an extra cushion of equity so they can lend more flexibly in case your company has had a bad year. In such cases, bankers will rely on your track record before lending. Having sufficient in your kitty after a bad year or two you will further reinforce your financial stability and help you to be more successful in negotiating the next loan renewal.
Collateral security to the banker
Collateral does not repay a loan, but it does ease the banker’s mind. Securing a loan against valuables or your immoveable property will also serve as a reminder of the dire consequences which you may face. This will make you more cautious in dealing with your finances.
Make the Competition work to your advantage Banks are concerned about their competitors’ interest rates, collateral packages, and guarantees. Use this to your advantage by doing your homework when seeking a loan and making that clear to your banker. Knowing about your bank’s competition can also let you prepare for a needed quick search for a new lender should your banker pull out.
Still not able to get your finances on track owing to poor credit rating? Lost your banker’s trust? Not getting your business loan in Edmonton, approved? Utilize the services of ATS, and get the accounting assistance and business know-how you need to expand and reach the pinnacle of success.