How to win financing from a bank without any hurdles – 2

Make sure that these transactions reflect the nature of the business in question. However, there is a tendency among some loan applicants of asking friends to deposit huge amounts in an account in order to deceive the bank that a business has adequate cash flow. Surely, that will not help.

The account must reflect actual business operations. In my banking experience, I have come across many such accounts and unrealistically large sums of money that could not be substantiated led to disqualification of financing. I am sure facilities granted through these exaggerated bank statements ended up doing poorly.

In case of well-established businesses, banks accept statements from other banks. Make sure accurate bank statements are submitted without any hindrance because they help a lot in building a case for a financing facility.

In some other circumstances, especially when dealing with small businesses, statements from mobile money operators are acceptable because it is a fact that most small businesses receive payments and pay for their expenses through mobile money accounts. It is a good reflection of business cash flow.

The second factor is to be transparent with bankers and not attempt to hide any information concerning business or assets. Make sure that you disclose all the positive and negative aspects of your undertakings to enable your banker have a complete picture and advise you accordingly.

There are different kinds of facilities, including those which are open whenever there is a need, referred to as working capital, and some are referred to as bank overdrafts. These facilities benefit entities that frequently need funding for their businesses in terms of stocks and recurring expenses. There are also term loans, which are used to finance acquisition of assets and are paid over a long-term period.

By being transparent you enable your banker to advise you on the kind of facility that is suitable for you. Transparency is also required on collateral and you should make sure you disclose all your properties to your bankers. It will be absurd to tell your banker that you have property “A” only, while you have other assets which are more valuable. This sort of non-disclosure, if known later by those who authorise financing, could lead to disqualification of your application.

Questions will be asked as to why a particular customer is reluctant to disclose their important assets as collateral. This could prompt decision-makers to conclude that there is an intention of future default.

Being transparent at all times is good for the client as in almost all cases bankers visit customers’ businesses before approving financing.  I recall a certain customer that we visited. He wanted to start making building blocks, which were not well known in Tanzania and wanted to import a complete plant.

We advised him to test the market first through importation of those blocks before incurring the huge expenditure. Our advice helped him because it turned out that those blocks were not popular with builders.

Bankers encounter different kinds of businesses and they normally have general knowledge and are thus good advisors. Make sure you are transparent and bankers will advise you well. In the banking industry, business teams are constantly evaluated on the quality of their financing books and it is therefore in their interest to maintain good quality customers. If most of their customers end up not repaying their facilities, they risk losing their jobs.

The third factor is to be honest in utilising bank facilities in the manner that was intended. Make sure that funds are not diverted and you stick to your repayment plan. You should not be dishonest in any way because this could jeopardise your future relationship with your banker.

In the next part of this series I will discuss further the factor of being honest and its importance in getting finance from a bank. I will also provide insights into other requirements spelt out by banks before they approve financing.

Dr Muhsin Salim Masoud is a seasoned banker and academic, who has also served as managing director of the People’s Bank of Zanzibar and Amana Bank. [email protected]