THE BEST LAID PLANS OF MICE AND MEN……what would Robert Burns know about your bank’s assessment of you?

The small business sector often have rigorous reviews undertaken by their bank before new loans are approved. Here are some of the business characteristics they look at

in making their decision as to whether you are worthy of support or you might [as Burns might put it] go astray:

• sales trends
• profit record over 3 years at least [ there are industry data bases that can overlay your results that will put you in a strong/good/poor cohort]
• working capital, cash reserves, unused overdraft facilities and debtor/creditor ratios
• policies to control trade debtors, provisions for doubtful debts etc
• inventory turnover, policies in respect of obsolete and slow moving items and supply chain issues
• policies in terms of trade creditors, extended terms, legal action and control of cash
• equity position, dividend policies, loans etc
• asset quality, condition of plant, cap-ex policy, leasing policies, insurable risks, shareholder loans, new asset requirements
• historical cash flows, profit margins, pricing policies, shareholder loans and dividends
• future loan repayment capacity, reliability of sales/profits, market conditions, working cap to fund growth, management capacity
• skill set of management, business planning evidence
• management integrity, ATO disputes, bank relationship, standing in community, legal issues
• management succession factors
• conduct of previous borrowings, adequacy of existing IT systems to keep data real time
• business industry risk
• bargaining power of business’ customers/suppliers, level of competition