Tuesday, September 01, 2009

Business finance - Getting the best deal from your bank

When applying for business finance through a bank there are a number of useful tips that you may want to consider to get the best deal from your bank. In the current economic climate where banks are a bit more risk averse and entrepreneurs often may op for alternative business finance its important that you know your way around the financing landscape.

New business owners often turn to the bank that holds their personal account when finding funding, but you should compare charges from at least four banks (for example, how much does it cost for cheques, deposits, standing orders and overdraft facilities). If you’re already trading, changing banks is now much easier than it used to be and it could save you money. For more advice, read our guide to

Many banks offer free business banking for a set period, but find out what charges apply after the introductory period. Ask what ‘free banking’ means – it may be free only if you’re in credit or your turnover is under a certain figure.

When choosing a bank ask these questions:
 What support is offered? – Do they have a dedicated small business team, will you be allocated a specific adviser and is there support material, such as free websites and guides?
 What services do they offer? – For example, do they offer internet or telephone banking? If so, do they charge for this?
 How are charges levied? – Is there a fee per transaction or a one-off charge?
 How close is it to your premises? – If you’re likely to have a lot of transactions requiring you to visit the bank, then proximity is a key issue.

How to keep banking costs down
 Negotiate with your bank manager – Everything is negotiable, from overdraft interest rates and charges to loan repayment schedules. Get any special terms in writing
 Reduce transactions – Try to avoid cash and cheques. Automation – direct debits, standing orders, internet banking – tends to be cheaper
 Review charges regularly – Ask your bank manager to suggest how to reduce charges  Earn interest – If you have extra funds, put them in a high-interest deposit account.

 Make sure the charges are correct – Check any discrepancies between statements  Avoid unauthorised overdrafts – Telephone and internet banking can help you keep track of your account, to see approaching problems What to do if the bank says ‘no’One in 10 business loans applications are rejected. If this happens, find out why, so you can then revise your plan and try again.

There is also non-bank capital available. The South African Investors Network has a list of institutions that help fund businesses. Usually funding depends on the owners being from certain communities, age brackets or geographical locations, as well of course the viability of the business idea.

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