Published: 01 February 2008.

By Mike Phipps - Suncorp

Never is the expression "first impressions are important" more true than when you present a credit proposal to your bank. This is particularly relevant for new business ventures including off the plan Management and Letting Rights purchases. The level of information you present when requesting management rights finance will depend on the complexity of the proposal, the amount of money involved and on how well your business banker already knows you and understands the rights industry. The type of information will vary depending on whether you are requesting funding for a new building, seeking to extend an overdraft limit or seeking additional funding for future business plans.

The following basic documents should form part of any business loan request. Many resident managers maintain most or all of these documents on an ongoing basis and only need to collate a set of copies. For others, particularly new entrants, it’s a bigger job but one which will prove very worthwhile both for credit applications and for general day to day management of the business.

Business Plan

This is a bit of a buzz word at the moment and has been for a couple of years. While some business people see the Business Plan as a waste of time, most who go through the exercise find considerable value in it. More importantly, my observation is that most highly successful resident managers do business plans. Essentially the plan sets out your strategies for the ongoing success of your site. It’s a road map of where you want to go and how you are going to get there. Most effective business plans will include an analysis of the strengths, weaknesses, opportunities and threats effecting the business together with strategies to maximise opportunities and minimise the impact of negative factors. If you are daunted by the task there are a number of highly competent consulting and accounting firms who can assist you. Most advertise in the Yellow Pages.

Cash Flows

Of all the management tools available to resident managers the Cash Flow Projection is probably the most under-utilised. While not particularly relevant to permanent sites the seasonal nature of holiday based buildings really demands some form of cash flow management. The projections are simply a basic estimate of inward and outward cash flows over a particular period. The flows are generally divided into monthly increments with the report typically covering a 12 month period, more often than not a financial year. The Cash Flow should always be accompanied by a set of assumptions which tell the reader how the figures were arrived at.  The report should also be changed on an ongoing basis as various factors impact on cash flows. The Cash Flow Report will never be perfect but it will give both you and your business banker a basis on which to work in terms of planning expected cash flow and hence, funding requirements. I recommend discussing Cash Flow planning with your accountant on a regular basis.

Business Resume

A history of your business experience and qualifications should always be provided when seeking new business finance. This is particularly important when seeking funding for a new venture. If you are already in business a history of that venture should be included. Most business bankers will place enormous importance on your previous business and industry experience when assessing a credit application. Sell yourself!

Financial Statements

Most bankers like to see your past three year’s financial statements. These should include Profit and Loss and Balance Sheet for trading entities and taxation returns for individuals and/or company directors. Even if you’re purchasing a new site and your past financial statements are no longer relevant you should provide them.  Historical profit and income figures will give your business banker a feel for your past success and assist in placing a new venture request in the best possible light.

Supporting Information

If you do an owner’s newsletter ever month I strongly recommend putting your bank manager on the mailing list. I’ve seen some excellent newsletters over the years that really captured the essence of the business.  Given that most on site managers use the newsletter as a “current affairs” bulletin the content will keep your bank up to speed with how you are travelling. As your major equity partner (so to speak) this can only be a good thing.

Proposal

Last but by no means least you should present your proposal. The finance request should spell out your preferences for how the funding is to be set up, over what term, security available, borrowing entity and repayment plans. Most importantly you should spell out the use of funds and the likely impact on the business. The single most common pitfall in this process is to request a finance structure that you think the bank can accommodate. Never forget that you are the customer and your bank is the service provider.  My advice is to request a finance package that best suits your needs and challenge your Business Banker to deliver. You will be pleasantly surprised by the flexibility of most business products provided by the banking industry. Don’t ever assume that a particular structure can’t be provided. The times have changed!

In summary, be prepared.  You will create an extremely positive image for your business and finance turnaround times will be greatly reduced. Most importantly the process of putting a credit request together will make you a better manager of your business.

Mike Phipps
National Business Development Manager
Management Rights
Suncorp

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