How to make the most of your bank

Checklist

  1. 1 Find out which individuals you will normally deal with; meet them and aim to build a personal relationship.
  2. 2 Explain your business to the bank; show them a copy of your business plan and give them the chance to comment and make suggestions.
  3. 3 Invite your bank contact to visit your premises to meet key employees and to get a better understanding of your business.
  4. 4 Use your budgets to forecast your cashflow; give the bank as much advance notice as possible of any anticipated financing needs.
  5. 5 Build a safety cushion into your financing; consider worst-case scenarios.
  6. 6 Keep the bank informed; let them know when your plans change.
  7. 7 Investigate the availability of loans and other forms of finance for long-term requirements rather than relying entirely on your overdraft.
  8. 8 Consider fixed-rate loans (if available) to help with cashflow planning.
  9. 9 Always ask for a clear explanation of all the costs involved in borrowing - for example, arrangement fees - as well as the interest rate.
  10. 10 Manage account balances; use Internet banking to reduce costs and increase efficiency; move any spare cash the business may have to a savings account paying a higher level of interest.
  11. 11 Investigate whether other services the bank can provide (eg credit cards, insurance, pensions) are competitive.
  12. 12 Consider consolidating as much of your financing business as possible with one bank to make yourself a more valued customer and reduce the interest payable.
  13. 13 Keep your promises to the bank: provide information when you say you will, make payments when they are due, stay within your overdraft limit.
  14. 14 Warn the bank immediately if you face payment difficulties; work out a solution together.

Cardinal rules

Do:

  • build a personal relationship
  • forecast your financing requirements
  • plan for worst-case scenarios
  • demonstrate that your business is well managed
  • keep the bank informed
  • negotiate the terms of loans

Don't:

  • rely entirely on overdraft financing when better alternatives are available
  • let spare cash sit in a current account earning little or no interest
  • hide financial difficulties until it is too late