Businesses are being advised not to take refusals of help with funding from banks as the final word on the matter.
The Institute of Chartered Accountants in England and Wales (ICAEW) has said that, if funding requests fail, businesses should be prepared to challenge the decision.
Clive Lewis, small and medium sized business expert at the ICAEW, urged firms to be persistent: “If you don’t think the person you are dealing with understands your business or the particular problem you have, try to talk to someone higher up.”
Mr Lewis continued that the banks appear to be willing to lend to what they see as viable enterprises.
“In their terms this means having a strong, well-balanced management team; firm financial controls and accurate forecasting; a good product or service; a plan for recession and a sensible capital structure,” he explained.
Mr Lewis also emphasised the importance of credit ratings: “When turnover is falling, profits are falling and asset values are dropping, credit ratings go down. Banks have to put more capital aside to cover the risk of default for a business with a lower credit rating.”
For this reason, wherever possible firms should aim for good day-to-day control over cash flow, tighten their credit controls and avoid bad debts.
Mr Lewis added that businesses seeking finance from their banks should ask about the government-backed Enterprise Finance Guarantee scheme.
