PKF Carr & Stanton, Hastings, New Zealand
15 Mar 2016
You may not think of this when you are considering applying for a business loan, but it can be very beneficial to work closely with your accountant when you do.
Why? To ensure the process is managed correctly and to maximise the chances of success to secure the funding, whether you need it for more equipment, more staff, or moving to other premises.
Your accountant can also assist in applying for the right amount you are likely going to need and can service. They can prevent you from borrowing $15,000 and having to go back a few months later to ask for another $15,000 – this doesn’t show good financial management. How much you should be borrowing, depends of course on what you need it for, and as a general guide you should consider a balance of 2 to 1 regarding current assets to current liabilities. And you guested it, your accountant can assist you with this.
Banks will look at how your business is performing, what money comes in and when, and where your profit margins are. But they also look at your projections, and how you will use the borrowed money, to make more money in order to pay back the loan and manage a good business. Your financials should be clear, accurate and up-to-date.When you are applying for a loan, be precise about what you require the funding for and remember, the more information the better for the bank. As long as the numbers are realistic, and you can show how you are servicing the loan.
Prepare your documentation that also shows what kind of loan you would like: interest only, floating, fixed and for how long. The structure of your loan is important for your business, and also for the bank. Put yourself in the shoes of the bank manager: would you loan money to someone that is unprepared and doesn’t really know what he wants or if he can even repay the money? Most likely not.
As mentioned above, there is plenty of financial information required to get a business bank loan, and a good accountant should be happy to assist you with this process. Your accountant can also suggest which bank would work best for you with your needs, as banks are all different. Sometimes it makes sense to ask your existing banker, they know you and your history, but sometimes it makes more sense to go elsewhere.
Do you have the trust that your accountant can supply you with accurate, details financial information so you can present your application right the first time? Do you understand everything about the financial position of your business now and where you want to go? Make sure you have got the right accountant on board, one that works alongside you and supports you by providing the right (and accurate) information when you need it.
If you don’t feel you have the right accountant, we invite you to make a time for a complimentary review with one of our business advisers to discuss the options and plan a strategy for your future.
For more information on how our services can help your business get in touch.