Welcome

Introduction to seminar

What do you hope to learn in the next two hours:

Burning issues?Topics of interest?

Opportunity to network

Have fun!

Learning Outcomes

Applying for a loan

Refinancing

Switching banks

Managing your banking relationships

Section References

Applying for a LoanSection Twelve

Refinancing Your DebtSection Thirteen

Managing Your Banking Relationships Section Fourteen

Applying for a Loan

To achieve a successful loan application:

Provide all relevant information

Professional presentation of information

Applying for a Loan Hint

If you follow the guidelines as detailed in the book, you will be well prepared, better informed and more confident in your approach to potential financiers

Loan Application Information

Personal

Historical

Forecasts

Assumptions

Loan Application Information

Personal information

How you manage your business

Credit history

Personal guarantee

Loan Application Information

Personal Information may include:

Personal assets

Tax returns

Personal bank details

Credit history

Page 83

Loan Application Information

Historical financial information:

BAS statements for the past four returns

Current accounts receivable and payable schedules (debtors and creditors lists)

Bank statements for the past three years

Details of any current or previous bank or other loans

Details of any other types of financings such as leasing or hire purchase

Previous bank relationships

Key customer relationshipsPage 85

Loan Application Information

Forecasts

Cashflow

Profit and Loss

Balance Sheet

The Funding Application

Purpose of the loan

Amount of the loan

Term of the loan

Servicing the loan

Security for the loan

Presentation to Financier

The loan application package

Meeting with the financier

Role of advisers

Page 86

Applying for a Loan – Tip

The more information you present to the financier about your industry, the company, key management, and your marketing plan, the easier their job becomes to review and support the loan application. Loan officers agree that a complete, well prepared loan application will go to the top of the pile

Refinancing Debt

Lending institutions

Debt products

To a single facility or product

Total amount of the borrowing

Repayment amount or timing

Security

May involve changing:

Page 87

Refinancing – Hint

Refinancing can involve a number of alternatives. To receive the best outcome ensure that you understand all the alternatives before committing to a new lender

Refinancing Debt

Why?

Improving interest rate

Switching to fixed or variable interest rates

More flexible features

Increasing your overall borrowing

Changing cashflow commitment

Consolidating debts

Releasing security

Page 88

Refinancing – Common Dangers

Underestimating the:

cost of payoutingoing costs

Asset security used to support multiple borrowings

Change in security valuation

Impact of leaving a long term banking relationship

Page 90

Refinancing – Benefits

New perspective based on your current position

Access to increase in debt finance

Consolidation

Restructuring security offering

Page 89

Refinancing – Tip

Refinancing a strong healthy business may also mean that there is an opportunity to separate your personal assets from security offered if the value of the business assets are sufficient to cover the borrowing (i.e. commercial land and building, debtors, fixed assets etc)

Switching Banks

Good banking relationship is critical for business

Switching banks should entail good groundwork

Before switching, consult current bank to discuss issues

Page 91

Switching Banks – Hint

Use the Small Business Victoria Loan Finder found on the website to help assess what each bank can offer

See page 91 for link

Switching Banks

Preparation is the key when considering switching.

Steps to prepare:

1. Create a list of all bank accounts in your business

2. Obtain a letter of facilities

3. Select your top three preferred banks

4. Meet with your current bank

5. Review your current bank offer

6. Meet with alternative banks on your list Page 91

Switching Banks

Before switching:

Will the new bank agree to fix pricing for a period?

Will there be additional costs as a result of switching banks?

What is the new bank’s service level?

Give preference to the bank which allows you to meet with the bank staff other than your account manager

Page 92

Switching Banks - Tip

Comparative information on bank finance is available on the CPA Australia website

See page 92 for link

Banking Relationships

Annual review

Continuing relationship

If difficulties arise

Banking Relationships - Hint

Good relationships with your bankers will ensure that they understand your business and are in the best possible position to provide advice and support when needed

Banking Relationships

Annual review on anniversary of bank loan orannually when financials available:

Need to take seriously

Bank have wide reaching powers over providing facilities

Should have all information ready

Be candid if things are not going well

Ask for improvements if business has improved

Page 93

Banking Relationships

Continuing Relationship:

A 'hands on' approach

Growth business can expect assistance

Keep the bank well informed – ‘the good, the bad, the ugly’

Use your banker to assist in business operations

Page 93

Banking Relationships

If difficulties arise:

Generally, banks can 'call in' loans

Usually notified by conversation or mail

All facilities 'called in' must be notified in writing

Keeping the bank informed is the best management strategy

Page 94

Banking Relationships

If difficulties arise the bank may help by:

Agreeing to change your borrowing arrangements to make repayment easier

Assisting you with plans for improving cashflow and profits

Recommending that you discuss your problem with your accountant or put you in touch with independent advisers

Choose your banker like you do your doctor!

Banking Relationships - Tip

How to Handle Your Bank

Be well prepared before approaching bank for a loan

Ensure that there are benefits before switching

Develop a good banking relationship

Keep the bank well informed – good and bad

List 3 actions you will follow through with as a result of this

workshop

Then

List 3 things that you’ve learned in this seminar

List 3 actions you will follow through with as a result of this

seminar

List 3 things that you’ve learned in this seminar

Business mentors help you to identify a clear direction for you and your business.Business mentors can also advise you on how to:

conduct market researchwork out your break-even pointprice and/or cost your products or servicesdevelop an effective marketing strategyuse other business management tools

To arrange a session with a business mentor go to:

www.sbms.org.au/OurPrograms/SpecialistVouchers.aspx

and type in AFS as your code

Using your SBMS voucher

Questions?

Thank you for attending

Check outbusiness.vic.gov.au/workshops

for more workshop information