Below are 3 easy steps for company owners to do if they are not happy with their bank, or just wanting to check if they are still being looked after as well as they should be. It takes little effort and minimal management time:-
- Ask 2 or 3 of the other major banks to pitch for your business. They will do all of the work to put together an alternative offering, not charge you and put their best foot forward. This is just a simple matter of using “market forces” to distil the best outcome.
- Once you have the results, compare the best to what you already have and then either change or let your existing bank know what they need to do to keep your business.
- Pay careful attention to any “performance” criteria in potential offerings or existing agreements. These agreements (which you sign) are very much like a marriage “prenup” and it will definitely be referred to if things going slightly off the rails. There are often covenants within these agreements around trading profits as a percentage of turnover and debt ratios requirements which trigger substantial increases in “bank margins” if they are not met. It is a license for a bank to increase rates on you at their discretion. (This has always fascinated us as it essentially allows a bank to increase your interest costs at a time when you are not trading so well and the last thing you need at that time is increased overheads!)
Finally, one word of warning. Any account manager who verbally promises anything which is not clearly spelled out in these agreements, probably won’t be at that branch in 3 years to honour their commitment, so make sure it is all in the agreement. Remember if things ever go off the rails, this is the document that comes out so it needs to be right!
All of the above is simple to do, however if you don’t have the time, speak to your accountant or finance broker as they should be doing this on a regular basis for many of their clients.