Managing Your Creditors

4. Your Bank

If you are going through a cashflow crisis, you need your bank more than ever. But if your bank is financially exposed, this is the exact time when the bank is most likely to reduce its financial support for you.

4.1 Identify who the real decision-maker is at the bank.

• More and more lending decisions are made on the basis of computer-generated risk profiles. This leaves local bank managers with less decision-making power.
• You need a champion in the bank who knows your business and who will be listened to when decisions are made.

4.2 Build up a track record, so the bank trusts you and the information that you provide.

• Supply the bank with regular management accounts, including cashflow forecasts and a brief commentary explaining variances. Be proactive, rather than waiting to be asked for the information.

4.3 Give advanced warning to the bank of any cash shortages. The earlier your warning, the more support you may receive in return.

• Provide evidence to show that the cash shortage is only temporary. Third party evidence, such as a confirmed order, can be particularly effective.

4.4 Shop around, so you have options ready when you need them.

• Even if you expect to remain a loyal customer, find out what is on offer from other banks and alternative sources of finance. This will enable you to negotiate better terms, and you can win the bank's respect in the process.
• In principle, the bank can demand repayment of an overdraft at any time. Consider the benefits of alternatives such as bank loans, leasing, hire purchase and factoring. In smaller businesses, personal finance is increasingly a major source of funding as well.