Banking on the right decision

You need heavy-hitters on your side when you approach a bank with a view to getting finance for investment.

When a client needs to persuade a bank to make a substantial investment in their business, we always recommend that they get their professional advisers involved at the earliest possible stage. Unless you have your accountant on board and get some support in presenting your case, there’s a danger you may end up shooting yourself in the foot.

Banks can be notoriously difficult to impress and can fall back on a tick-box mentality when it comes to deciding on finance. They’ll look at the recent figures and overheads, but can fail to take into account the bigger picture and the great opportunities that can come with investment.

Even with our involvement, the process of convincing the bank isn’t always easy. Different potential funders often ask for information in varying formats. Sometimes banks – despite the preparation of a detailed business case – seem as if they don’t quite ‘get’ it. 

As well as a paper analysis of where the business is heading, you may need to support your pitch in other ways – video that demonstrates the advantages of technology, for instance, and tours of the current facilities. 

It’s also important to set out your stall right at the beginning. Ask the bank’s local representatives whether they are actually able to make a decision. If you know the green light will have to come from someone further up the hierarchy, politely request that they come down to your client’s site and have a face-to-face meeting. 

At the end of the day, a successful request for funding is going to come from a partnership. On the one hand, there’s your expertise and knowledge about your business and market place. On the other, there’s the guidance and advice of your accountants and other advisers, who know from experience the best strategies to employ during the negotiations.

Don’t let customer debt get you down

You've identified a potential bad debt. You've sent the friendly reminder, the follow up letter seven days later. You've then phoned two or three times and sent a final notice. Still no joy. Where does it go from here?

It’s a familiar scenario for lots of business people. What seems like a slightly overdue payment is starting to turn into a troublesome debt. You don't particularly want to start formal legal proceedings, as they've been a customer for some years but you're getting increasingly frustrated. 

The phone rings. It’s the customer telling you about their cash flow problems. Things will apparently be resolved next week, so you agree to give them more time. But next week rolls around… nothing. The following week... still nothing.

You are now getting increasingly worried. You might be a key supplier and of course you could place their account on hold, but that could make the situation worse and actually reduce the prospect of payment. What you need is for the customer to engage with you. 

A good first step in this scenario is to speak to your accountant. If they are not themselves an insolvency practitioner, the chances are they will have a good working relationship with one. When they are instructed by a creditor, they will write to the debtor to advise that they have been consulted. The message is usually that failure to either make payment, or provide an acceptable and deliverable payment plan, may result in the creditor taking matters to the next stage, which could ultimately be an insolvency event.

By issuing an unambiguous statement of intent, you make your position clear to the debtor and in doing so you'll invariably find they'll try to prioritise payments to you.

The involvement of a third party in these circumstances will often produce the desired result. If not, then an assessment would have to be made to ascertain whether it's financially viable to pursue matters further.

If you find yourself in this situation and would like to discuss your options, the best thing is to contact your accountant initially. Appropriate action can then be advised on a case-by-case basis.