A requirement of nearly all business finance facilities is that the bank conducts an annual review.
Be prepared for the annual review or you will make it easy for your bank to adjust the terms of your finance facilities or even withdraw your facilities altogether.
Your bank will often require your latest accountant prepared financial accounts, your business plan for the next 18 months and cash flow forecasts for the next 12 months. They will also look at trading conditions in your industry and in the economy as a whole.
Your bank is assessing if you are still a good risk to lend money to. This assessment is not always undertaken by your local relationship manager who may know you and your business. More often these days the review is assessed by credit managers that may be interstate and don’t know your business or know you.
At Bespoke Finance, we assist you to prepare for the annual review with your bank by critically analysing your financial accounts and testing your future cash flow assumptions. We will prepare an information pack for your bank that fairly represents your business and your future growth plans and gives you and your business the best opportunity to access competitive finance terms.
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Cash flow is King
The most important aspect of seeking finance is proving that you can repay it.
The banks will primarily look at your past 2 years of financial performance to get some comfort that you have the capacity to pay. They won’t put much weight on your forecast performance because experience tells them that business owners don’t spend much time on forecasts and they are too optimistic.
Now this is fine if your business is stable and your future performance is going to be much like your past.
But if your business is growing rapidly or you are strategically restructuring your business then past performance may be misleading.
Presenting professionally prepared cash flow forecasts with defendable assumptions and a business plan that supports your business growth will allow the bank to put more reliance on your future performance.
Ask us how Bespoke Finance can assist in arranging and negotiating your finance.
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Seeking finance too late
Why is it that when you need finance it is the time the bank won’t lend to you? Because you did not plan for finance.
Forecasting your business performance and asset purchases over the next 24 months will highlight the peaks and troughs in your cash. This will indicate the extent, timing and type of funding needed.
Surprisingly, many businesses don’t spend enough time forecasting their cash flows and if they do, the forecasts are too rosy.
Bespoke Finance can develop a simple-to-use cash flow model for your business to help you plan for your finance. Call now and ask about our finance planner.
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Are all the banks the same?
The answer is a definite yes ...... and no.
A $100 note from one bank is the same as the $100 note from another bank.
The difference is not in the money but in the terms and obligations around the money.
The banks are masters of making the lending of the same $100 note very confusing. There are different interest rates, account fees, terms of loan, early repayment fees, fees for changing products, redraw, interest offset, ATM access, branches, internet, interest only, repayment holiday ... the list goes on.
Forget all the choices at the moment. The most important thing to focus on is what you want to do for the next 3 to 5 years.
At Bespoke Finance we focus on tailoring a finance solution to match your needs. It is more important for us to know if you plan on selling the property in a couple of years, wish to renovate, wish to access funds for a holiday, want to buy another investment property, prefer internet banking or want to keep your existing transaction account.
Call Bespoke Finance to arrange finance for your next property purchase or to review your current property loan.
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Fixed or Variable Interest Rates?
This is as easy as heads or tails.
You will have your own view or theory on interest rates but the most important thing to focus on is your comfort factor.
The question I would ask you is, ‘how would you feel if rates went up or down by 3%?’
Some people are happy to take the risk of market rate movements. They don’t want to miss out on rates decreasing but they also feel they can afford the higher repayments if rates do rise.
Others want the certainty of fixed repayments.
It is possible to have a foot in both camps by having part of your loan variable and part fixed. A bit like having an ‘each way’ bet on the Melbourne Cup.
No one can predict accurately what interest rates will do over the next 3 to 5 years. Make your choice on what you can comfortably live with.
Call Bespoke Finance so we can tailor a finance solution to meet your particular needs.
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