Lending – it’s not like it used to be



Author:  Colin Spencer, Associate Director

I was reminiscing with a client recently how different it used to be trying to raise finance from the bank prior to the credit crunch.

Just over ten years ago I was involved with a business that moved office and had a lot of expenditure upgrading the premises which put a strain on our cashflow.  To help tide us over, a quick email to our relationship manager outlining the financial projections of the move and the impact on our cashflow forecast moving forward, followed by a lunch,  was all that it took to secure a twelve month loan, at a very reasonable interest rate and low arrangement fee. The next day the paperwork was signed without any need for endless security and by the end of the week the money was in the bank. I can always remember the managers’ words at the end of the lunch “Colin , you won’t let me down will you?”.  Well no, I did not let him down and the loan was paid off in full over the twelve months which what I had forecast!

How things have changed since the credit crunch! I know that banks are constantly saying they are open for business but I cannot imagine a loan being granted at such short notice these days on the same terms.

One thing that still remains constant though is the need for robust forecasts, both profit & loss and cashflow, that allow business owners to plan for the future. These forecasts are vital if a business is looking to invest in new products and if a bank is going to grant a loan they will want to stress test a company to ensure that it can afford the repayments as well as having necessary security in place.

As the UK hopefully continues to recover there is likely to be more borrowing requirements to boost the economy.