When the COVID-19 pandemic hit earlier this year, there was concern we would see similar pressures across the banking system as we experienced during the Global Financial Crisis (GFC) in 2008.
Fortunately, the liquidity position of the global financial markets today is very different to what it was in 2008. Additionally, the speed at which the Australian Government and the Reserve Bank of Australia (RBA) responded to COVID-19, meant measures were put in place to ensure the banking sector, and therefore the economy, had enough access to capital and funding.
An important nuance to this, which many people overlooked, was how the access to capital and funding was delivered. Rather than making the stimulus measures direct-to-business, the government used the banks as the mechanism to get cash into the economy.
Banks and lenders became the sole conduit for access to the government initiatives. So, regardless of whether it is one of the government initiatives or a traditional product offering from a bank, small business owners need to go through a bank credit process to access capital and/or funding.
In the current environment, putting your best forward to lenders is crucial to secure the funding and security you’ll need. While you may have a strategy in place to manage your business operations through this period, without a detailed cashflow analysis and compelling value proposition to back it up, you risk doing more damage to your business longer term and losing credibility and opportunity with banks and lenders.
However, for many small businesses, the bank credit process can seem a bit of a mystery and we have seen instances where some businesses have had trouble getting the attention of their bank and others were rejected entirely.
Lenders gain confidence in your business if your plans are carefully thought through and you know exactly what you need to get through the current uncertainty and out the other side. So, before you meet with your bank or lender, remember three important rules: