HOW TO IMPRESS THE BANK MANAGER

QUESTION
I am in the process of opening my first business. I am putting in 50% of the start-up cost. I am also offering a guarantee on a free hold property. How can I get the best deal possible from the bank? This business will be a cash rich business.


ANSWER
The first thing I would advise you to do is prepare a good business plan. Research your market and determine what you need to achieve your aims.

When presenting your case, remember you are selling the project as if the bank is a customer. Ensure that you are well equipped with the key facts and figures and have covered all eventualities.

Evaluate all the finance options available to you and be prepared to answer questions about any assets you may have in case the lender requires any security.

You could consider using your personal savings, the retained earnings from the business, equity or loan finance. The more security you can put towards the loan, the better the rate you will get.

You may also want to consider organising an overdraft facility that you can use as working capital as and when required.

If you decide to take a loan you should consider whether a fixed or variable rate product would meet your requirements. If you would like the piece of mind of regular payments, then a fixed rate option may be the best thing for you.

If you want a loan that tracks base rate when base rate is low, then a variable rate would be more suitable. Your bank will be able to explain the options available in more detail. Many banks will offer an introductory period of free banking. You may qualify for between 12 and 18 months of free banking. If your business is cash rich, then a good savings account will offer you the best interest rates. You could also consider other ways to use any positive balances to benefit you.

Some banks now offer offset mortgages for businesses, which allow you to offset positive balances on your business current and savings accounts against your personal mortgage.

SOURCE: BBC