How to run a bank account for possible future loan application
It a general knowledge that most SMEs business owners would rather transact cash than keeping their money in the bank. Some are even in the habit of operating savings account for their businesses. The truth is that if you want to have a successful loan application with any financial institution, the operation of your bank account is one of the key elements that would project the business as being loanable and there are deliberate behaviours that must come into play for a successful loan application.
Elements Of Account Performance for Loan Application
i. Routing all transaction through the bank. It is important to note that no matter what figure that is posted in the audited account and no matter what they represent; they are irrelevant if those figures are not reflecting in the bank statement of the business. Whatever accounting record that you keep, they would only be considered as a true reflection of the business performance if they reflect in the bank statement. I have had experience with some business owners that would bring their sales book and/or audited account to bamboozle the banker for loan application. Kindly note that for your business to be efficiently profiled for loan application the statement of account is what would be considered. Other documents are secondary.
1. Credit turn-over of the business. Because the financial institution is considering the bank statement as a primary document for loan application profiling, one of those things that they consider is the value of the transactions that pass through the account. An account credit turn-over cannot be N100,000 and the owner is requesting for N1,000,000; it would not fly. In some financial institution, they would lend to the business 100% of what it is doing averagely per month to be payable in 12 months minimum. If the request is for expansion. While considering over-draft, the business would only get half (50%) of what it is doing averagely per month; payable every 90 days. The credit turn-over of your business is a true reflection of the worth and value of the business.
2. Credit count of the business. Another thing that lenders consider is the number of times that the business account is credited every month. Kindly note that the more frequent the account gets credited the better the chance of successful loan application. It is not just enough to credit your account with a huge sum of money ones every month and expect the lender to look at that. The lender would also consider the number of time that the account gets credited. That would give the lender the patronage that the business is getting.
3. Average credit balance of the business. It is not enough to have good credit turn-over or credit count, the average balance in the account is also considered by lenders. Average opening balance, average closing balance, average highest balance, and average lowest balance. All of this is to be sure that the business has enough liquidity to take care of short term obligations. If what is reflecting on the statement is showing that funds get moved out immediately they come into the account; the business must be ready to substantiate with enough proof that the purpose is for the need for which they have applied for the loan in order to argument the gap credited by excess demand or inadequate supply.
4. Delinquent account performance. It is also good to note that issues like return cheques, debit on the account due to insufficient funds needs to be avoided in order to have a good account performance reflection.
All of the above must adhere to in order to have good representation and successful loan application.