05 Sep 2013
Words Tim Admin

Managing the Bank Manager

Never is the expression ‘first impressions are important’ more true than when we present a credit proposal to the banks. This is particularly relevant for new business purchases in specialised sectors such as motels and management rights. The level of information we present when requesting finance will depend on the complexity of the proposal, the amount of money involved and on how well the bank we use understands the rights or motel industry. The following basic documents should form part of any business loan request: Business Plan This is a bit of a buzz word at the moment and has been for a few of years. While some people see the Business Plan as a waste of time most who go through the exercise find considerable value in it. More importantly, my observation is that most highly successful accommodation industry operators do business plans. Essentially the plan sets out your strategies for the ongoing success of your business. It’s a road map of where you want to go and how you are going to get there. Most effective business plans will include an analysis of the strengths, weaknesses, opportunities and threats effecting the business together with strategies to maximise opportunities and minimise the impact of negative factors. If you are daunted by the task there are a number of highly competent consulting and accounting firms who can assist you. We are happy to make recommendations. Cash Flows Of all the management tools available to accommodation managers the cash flow projection is probably the most under-utilised. While not particularly relevant to permanent management rights the seasonal nature of holiday based buildings and some motels really demands some form of cash flow management. The projections are simply a basic estimate of inward and outward cash flows over a particular period. The flows are generally divided into monthly increments with the report typically covering a 12 month period, more often than not a financial year. The cash flow should always be accompanied by a set of assumptions which tell the reader how the figures were arrived at. The report should also be changed on an ongoing basis as various factors impact on cash flows. The cash flow report will never be perfect but it will give both you, me and the bank a basis on which to work in terms of planning expected cash flow and hence, funding requirements. I recommend discussing cash flow planning with your accountant on a regular basis. Business Resume A history of your business experience and qualifications should always be provided when seeking new business finance. This is particularly important when seeking funding for a new purchase. If you are already in business a history of that venture should be included. Most banks will place enormous importance on your previous business and industry experience when assessing a credit application. Sell yourself! Proposal Last but by no means least you should present your proposal or even better have us do it for you. The finance request should spell out your preferences for how the funding is to be set up, over what term, security available, borrowing entity and repayment plans. Most importantly you should spell out the use of funds and the likely impact on the business. The single most common pitfall in this process is to request a finance structure that you think the bank can accommodate. Never forget that you are the customer and the bank is the service provider. We always request a finance package that best suits our client’s needs and challenge the bank to deliver. You will be pleasantly surprised by the flexibility of most business products provided by the banking industry. Don’t ever assume that a particular structure can’t be provided. The times have changed! In summary, be prepared. You will create an extremely positive image for your business and finance turnaround times will be greatly reduced. Most importantly the process of working with us to put a credit request together will make you a better manager of your business.