Your guide to small business banking

It can be challenging for small businesses to see past the constant flow of slick marketing campaigns launched by the banks.

But at the end of the day, small businesses simply want to know that their bank will be there when they need it most.

Start off on the right foot by getting your loan application spot on, which can help establish a good relationship with your individual banker, suggests Joe Piovesan, chief executive of First Class Accounts, which offers small businesses national financial management support.

This process can take some time, so before approaching a bank, get your paperwork in order, he says.

Remember that the bank will assess your loan application by considering the size of your business, how long you’ve been operating, the industry in which you operate, how many employees you have and your future earning potential, among other elements, Piovesan says.

Specifically, the bank will want to see a detailed business plan, cash flow projections and a solid marketing plan, he says.

“The bank will want you to help give them a really clear understanding of your cash flow projections so they can see how much money you need to start off with and what you’re going to use the funds for,” Piovesan says.

“Banks tend to have very tight parameters around what they look for when assessing a small business for a loan. You should educate them not only about your business, but also about the industry in which you operate and what shape it’s in by presenting some facts and figures to the banker.”

If your application is approved, remember that both parties need to invest the time and effort into building a relationship, adds Philip Gomm, a director of financial services business at Capgemini Australia.

“It’s definitely a two-way street. The more time you invest in the relationship, the more you’ll get back. Don’t forget, the squeaky wheel gets the oil,” Gomm says.

“You’ve got to educate your banking representative about how your business operates so that when you need a line of credit to be extended, they understand how you’re going to use that money.

“The key is familiarity. You shouldn’t feel threatened by exposing the reality of the sector you operate in and how you fit into it.”

Banks also want to see that small business customers are moving with the times by embracing e-business, for example, he says.

“It’s so important to put your best foot forward with the bank. You need to give a lot of thought to digital and how you plan to capture payments, for example.”

The bank will also be interested in which method you plan to use to capture payments, Gomm says.

All small businesses want a seamless, frictionless payment transaction method, he says.

While capturing payments via credit card has been an expensive proposition in the past, it’s not anymore, enabling small businesses to get fees down to 2%, or even lower, he says.

“There is a very clear trend from cash to electronic payments, and we only see that increasing. There is of course also a decline in cheques, and small business owners need to anticipate more of what the impact this will have on their business,” Gomm says.

New service providers in the payments space (such as iZettle overseas) are shaking up the market by delivering value-added services back to the service provider, such as a detailed breakdown analysis on small business expenditure for the month, he says.

“This means that businesses are paying for the value that has been added to their business, which is what iZettle is offering clients, among others. All indications are that these will make quite an impact on the market.

“Whichever way you go, make sure your bank is on board with the decision you’re making in this area.”