For thousands of small businesses the idea of obtaining a bank loan has become little more than pie in the sky. Over the past couple of years, many have found the whole experience frustrating.
However, according to Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency, it is more a question of getting to grips with what makes bankers tick.
“The main concern for bankers is to protect their capital and this is what makes the sector somewhat conservative in their approach to lending money. They need to recoup the principle and earn a reasonable rate of interest. After all, bankers are not in the risk business. From the business perspective, banks are looking for credibility,” said Gerald Irwin.
Economic conditions will naturally have a profound effect on any credit decisions and certainly in the current climate, banks will not be persuaded to extend credit very easily. Collateral is a secondary source of loan repayment. Banks will want any loan repaid from operating profits and a bit of added collateral will almost certainly help the cause.
All businesses need a contingency plan. Mr. Irwin explained that a contingency plan is a particularly useful financing tool as bankers like to see that businesses have examined all the available options are looking to the future not just living for the day.