Banking on business

The days of the local branch manager who knew every business in his area and had the power to make funding decisions may be over, but there are still good reasons to create and maintain a good relationship with your business bank.

At a basic level a bank is somewhere to receive payments, keep the cash needed to cover outgoings, and seek credit. But just as your accountant can be more than just someone who does your books, the potential value of your bank extends beyond access to basic account services.

Start off on the right foot and you will be able to tap into valuable advice and might even be able to avail of products and services that would otherwise be inaccessible.

Spot the difference

There are various factors to take into account when choosing a business bank, but fees are a good starting point. While there will be little difference in the cost of basic services you need to make sure that you are not overpaying for a service that is crucial to your business.

It is not always easy to compare the charges levied by different banks. There are a number of websites that offer comparison services, but you might find that some don’t cover every bank so if you go down this route make sure you check more than one.

Don’t be afraid to query charges and see if there is any wriggle room on the rates being quoted.

Know your options

Despite the emergence of options such as crowdfunding and peer-to-peer lending, most funding for Irish businesses still comes from banks. Before you ask, however, it would make sense to familiarise yourself with the options available – do you know the difference between invoice finance and invoice factoring, for example?

Once armed with this information, you can have a sensible conversation about your needs. In many cases a simple overdraft will suffice, although it would help if you were able to do some basic cash flow forecasting to demonstrate what level of overdraft you might require and whether it would be required all year round or to meet seasonal shortfalls.

Make your case

If a loan is required, make sure you only ask for what you need and for the length of time you need it. A longer term or a higher amount might make you feel more comfortable, but you will end up paying a significant amount for that comfort.

This is another situation where regular communication is vital, particularly if business is slow and you are struggling to make repayments. The sooner your bank knows about the problem, the sooner you can find out what your options are.

Lending decisions are based on assessment of risk, so make sure your business appears as low risk as possible. The data available from a cloud based accounting package such as Big Red Cloud can be crucial in determining the viability of your enterprise and therefore its ability to repay any loans taken out.