How To Get A Loan From A Bank

Transcription

1 Standard Bank Talking Finance to Business

2 Agenda 1 Introduction Stage of business Cash flow management Financing solutions What do Bank s look at when considering a loan, and what can you do? Why are loans usually declined? How to improve your chances of getting a loan How are we filling the gaps?

3 So, you have a business idea...

4 SALES / TURNOVER (Impact value to bank) Stages of business PERSONAL BANKING BUSINESS BANKING Salary earner Seed stage Startup Growth Mature Decline Lending needs: Lending not required at this stage Am I an entrepreneur? Customer needs: Checklist for considering business ideas or opportunities Business plan guide Information on how to start a business Information on how to setup my banking structure once I start my business Lending needs: Information on how a loan application will be assessed and what information the bank will request from me Help me start well Customer needs Advice and guidance on starting a business, setting up infrastructure, budgeting and start-up capital requirements Education on how to optimise banking Lending needs: Start-up capital Working capital Lending usually comes from internal/personal funds or lines of credit e.g. personal credit cards and access bonds; family and friends. Stage risks for bank: Limited/no assets (collateral) Limited information and track record of business Limited information about management Recognise my potential and help me to grow Customer needs Solutions to reinvest profits back into the business to fund growth/expansion Solutions that will save time and money Management skills development Insurance to protect business, owners and employees Lending needs: Bridging finance where cash flow is needed to enable growth Finance to kick start growth Vehicle/Asset finance that will enable a significant leap in production or operation capabilities Property finance for new premises Working capital Debtor / supply chain finance to create cash flow TIME / AGE OF BUSINESS (Impact strength of relationship with bank) See me through the bad time Advice on exit strategies Business recovery mentoring Lending needs: Further extensions to overdrafts and increasing loan facilities Ability to restructure debt Stage risks for bank: Overdraft usage increasing, which increases bank risk Large withdrawals (e.g. cheques) against newly deposited funds Declining average balances on bank accounts resulting in less bank revenue Bad debts Inability to identify decline early might be detrimental to the customer and bank

5 Effective cash flow management is very important Appropriate financing is necessary to help in setting up and expanding operations, developing new products, and investing in new staff or production facilities Business analysts report that poor management is the main reason for business failure. Poor cash management is probably the most frequent stumbling block for entrepreneurs. Good cash management is simple. It involves: Knowing when, where, and how your cash needs will occur Knowing the best sources for meeting additional cash needs Being prepared to meet these needs when they occur, by keeping good relationships with bankers and other creditors

6 There are various financing solutions available 5 Standard Bank offers various finance options to suit your business need... Business Overdraft An overdraft can be used to finance cash flow and bridge timing gaps. Business loans, e.g. Business Revolving Credit Plan, Medium Term Loan Contract finance Guaranteed loans Business loans can be used for small acquisitions, bulk stock purchases and to finance some assets. A small business might be awarded a contract but lack the finance to start the work. Finance is provided based on the strength of a firm contract. These loans are for businesses that do not have enough assets to put up as collateral for a bank loan. E.g. Khula Vehicle and asset finance This is the ideal way to finance all your new and used vehicles and assets. Commercial Property finance / Business Mortgage This loan enables business owners to purchase, extend, or improve a property. Structured Working Capital Debtor Finance and Invoice discounting, ideal for rapidly growing businesses with quality debtors books. Improves cash flows.

7 Now you are ready to apply for a loan... What you need; Why you need it; When you need it; and How you will repay it. The 6 C s of Credit: CHARACTER CONDITIONS CREDIBILITY CAPACITY COLLATERAL CONTINGENCY PLAN

8 Banks consider various factors when assessing a loan application Financial criteria Environmental Owners own contribution Realistic projections Ability to carry debt Assets in the business Management Profile of owner / shareholders / directors Management / financial and marketing skills Technical skills, qualification and experience Risk associated with industry Location Competition Barriers to entry Security Tangible collateral Intangible collateral Personal assets of owner / shareholder Banks may assess this through automated on non automated means so ensure you build a solid relationship, and manage your accounts appropriately.

9 There are common reasons why loans are declined 8 Business is unsound, risk is too high, bank cannot determine risk business is not sustainable; Business over-geared; Adverse behaviour on existing credit facilities (indicator for future behaviour); Passive investment owners not involved in the business; Lack of owners commitment, often indicated by his/her contribution to the business; Character or suitability of owner; Business plan does not provide adequate information; Bank is not able to understand the business ; Inability to differentiate between personal and business expenditure; Purpose of the finance required is not justified; and Insufficient security or lack of collateral.

10 What you need to do to improve your chances 9 Build a good relationship with your Business Banker; Split business and personal accounts; Get your finances and financial records in order; Keep your credit record clean; Examine the reasons for wanting financing carefully and be able to articulate; Help the bank understand your business better; Stress your cash flows to understand the impact of interest rate hikes on your business. Conduct your business current account responsibly; Keep within your arranged limits with the bank; and Ensure full turnover goes through account.

11 How is SBSA assisting SME s? 10 Standard Bank is enhancing its offerings to SME s A new Enterprise development model bringing together Corporate Supply Chains, Financing and Business Development Support opportunities New financing solutions for high growth small businesses Working capital finance solutions Solutions for helping businesses to manage their key risks and to enhance growth BizLaunch Tried and tested BDS support Dedicated resources BizDirect BizConnect

12 Standard Bank: BizConnect ( 11

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