Business Finance: John Matthews on why securing a loan can be a matter of presentation

WITH the Business Bank (BB) being the third Government initiative to be announced this year, you could be forgiven for believing that loans would be readily accessible to SMEs.

Like its two, now either abandoned or under utilised, predecessors, the BB has been designed in an attempt to stimulate growth, by making �1billion of Government money available for borrowing by SMEs.

Although full details are not yet available, it is almost certain that the BB will be operated by the high street banks and this is where the problems are likely to arise.

A recent analysis of industry data found that high street banks turned down �1.3bn of overdraft and loan applications from SMEs in the first quarter of this year, with four in 10 being refused bank credit in the second quarter.

The banks would counter this by saying that any lending proposition must be reasonable, viable and evidenced by a robust business plan.

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Owners of small businesses will have a good idea of the level of funding they require in the short to medium term. However, it is imparting this knowledge to a prospective lender that could be the key to securing what they require.

Long gone are the days when you could sit down with your local bank manager and expect a decision from them based on your “back of an envelope” projections. You will have to present your case in a wholly structured manner in order to attain the approval of several levels of assessment, ticking all the right boxes on the way.

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So what is the answer? Accept that any potential lender will want to see a well presented business plan which will convince them that your requirements are based on realistic expectations of what your business needs and can afford.

This will include a cash flow statement, with coherent explanations of how you have arrived at the figures.

Armed with such a document, you are far more likely to secure the financial support your business requires and as an added bonus, the thought processes used in compiling the plan will no doubt prove useful as a planning tool for the future.

If, as the Government promises, the funds will be made available, put yourself at the front of the queue by providing the best possible presentation.

: : John Matthews is a partner at Ensors Chartered Accountants.

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