Corporate Banking 9 December Bank Financing

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1 Crprate Banking 9 December 2015 Bank Financing

2 FINANCING OPTIONS FOR MICRO & SMALL BUSINESSES Intr Steven Burrws, Lending Manager, Cmmercial Clients In cnjunctin with 2

3 Types f Credit Facilities Shrt-Term Bank Financing Overdraft and Credit Card A shrt-term facility that allws fr repeated drawdwns and repayments prvided a maximum amunt is nt exceeded. An verdraft is usually available fr a maximum f 12 mnths at which pint it expires unless renewed. Medium-Term and Lng-Term Bank Facilities Demand lan. A Demand lan prvides fr a single, binding facility f a stated amunt n a specified date. A repayment /amrtisatin schedule is established within the lan dcumentatin with installments, usually mnthly. Installments may be equal in amunt. The lan may be called by the lender. 3

4 Types f Credit Facilities Letter f Credit is an internatinal banking instrument which cmmits the issuing (pening) bank t make a payment n behalf f an imprter prvided the beneficiary (the exprter) presents the required (shipping) dcuments befre the expiry f the Letter f Credit Cmmercial Letter f Credit relates t a freign trade transactin. Standby Letter f Credit serves as financial supprt t a given transactin and is nly activated in the event f a payment default by the brrwer. 4

5 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Securing a small business financing can be challenging. Whether yu re just starting r lking t grw, banks and lending institutins can be rigrus in their assessment. But keep in mind banks need t make mney, and while they may have an ideal candidate in mind, even they have t cmprmise. THIS IS WHERE YOUR OPPORTUNITY LIES. 5

6 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Mst bankers are trained t use the same basic lending principles. The mst fundamental characteristics a prspective lender will want t examine are: Character Capacity Capital Cllateral Cnditins 6

7 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Character The fllwing traits are typically cited as imprtant t a bank s cnsideratin f yur character: Successful prir business experience An existing r past relatinship with the bank Referrals/Testimnials by respected cmmunity members References frm prfessinals wh have reviewed yur prpsal Evidence f a brrwer s care and effrt in the business planning prcess One additinal factr that many banks cnsider as evidence f a brrwer s character is the amunt f investment that the wners themselves are cmmitting t the business. 7

8 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Capacity A lender s primary cncern is whether yur daily peratins will generate enugh cash t repay the lan r ther debt. Mst lenders are aware, cash flw als presents the mst trubling prblem fr small businesses. Suggestins fr imprving cash flw Pay ff, r delay paying, debt Cllect receivables Reduce credit allwances and accelerate cash receipts Increase revenues/reduce inventry 8

9 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Capital Capital is a measure f financial strength. Lenders will want t knw yu have sufficient assets, financial reserves and persnal cllateral t endure business fluctuatins (and still pay yur lan). 9

10 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Cllateral Cllateral may be defined as assets that secure a lan r ther debt; the asset may be seized by the lender if the brrwer fails t make prper payment n the lan r ther debt. When lenders demand cllateral fr a lan r ther debt, they are seeking t minimise the risks f extending credit. In rder t ensure that the particular cllateral prvides apprpriate security, the lender will want t match the type f cllateral t the lan being made. 10

11 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Cnditins Cnditins refer t the general business cnditins in the brrwer s industry. Every business plan shuld cntain certain infrmatin related t cnditins: What are the cnditins and hw des it help r hinder their business? Hw might cnditins change and hw will the business be impacted? Hw can management affect cnditins in a psitive way? 11

12 Business Lans What Bankers Lk fr and Tips fr Winning Them Over Tips fr Getting Yur Bank Lan Apprved Keep in mind that t stay in business banks need t make lans. Be thrughly prepared when yu g t yur bank. Learn t anticipate every questin. Dress in a prfessinal manner. Be sure all yur dcuments are neat, legible and rganised in a chesive and attractive manner. Be cnfident. Ask smene t give yu a gd referral r prvide testimnials. Discuss the risk in yur applicatin. 12