How a bank may decide to lend your business money

Restructuring Insights

When you have a great business idea or want to expand an existing business, a loan can make all the difference in realising your dream.

You may choose to seek credit from a bank over an investor or another private lender because they:

  • are bound by codes of practice
  • don’t require you to part with equity
  • generally offer competitive interest rates

From your perspective, you may believe it should be easy to get a loan from a bank. After all, the general purpose of a business loan is to help you get set up or grow so you can make money and repay the loan. 

But from the bank’s perspective, it can be difficult to decide if it’s safe or risky to lend your business money. Without a proper assessment, how do they know that your business goals are realistic and you’ll have sufficient cash flow to make repayments when they fall due?

The value of an independent business review

An independent business review provides a bank with the information they need to make an accurate assessment.asset_8.png

The bank asks an expert accountant to evaluate the business on their behalf. The expert provides an objective report, and the bank uses this information to make an informed decision.

Your bank may seek a review to decide if it is a risk to loan your business money for the first time, or extend your credit if you already have an existing loan.

If your business is about to go through an independent business review, it’s important to prepare well. What you present to the accountant could make all the difference between a loan approval and rejection.

How to prepare for a review

We have strong relationships with many banks in Australia. If your bank engages us to review your business, our first step will be to contact you for a meeting.

We’ll tell you what to prepare, which often includes:

  • your business planasset_5.png
  • current financials
  • financial and cash flow projections
  • capital expenditure budget

The more information you can give us, the better we can report back to the bank to assist in their decision.

You don’t need to be nervous during the process. In fact, an independent business review can be an exciting opportunity to showcase your ideas and goals, and explain how a financial injection will help you achieve them.

The process also offers you a chance to demonstrate that your numbers add up, and that the cost of the equipment or tools you need is relative to how much revenue they will produce.

Be open and transparent, and don’t be afraid to ask questions. While we can’t speak for the bank, we are happy to guide you on the steps you can take to make the process easier.  

What happens after a review

After an independent business review, we give the bank an objective report on your business. The bank uses this information to decide what to do, and will generally contact you directly to advise the outcome.

If in going through the process of a review you feel your business would benefit from expert advice, you are welcome to contact us and speak with someone in our business advisory team. The same applies if your business is struggling. Whether you do or don’t receive a financial injection from the bank, it may help to discuss your options with a restructuring and recovery expert.

They can assess your situation, and work with you to develop a strategy that meets your business’s unique needs.

To speak with a financial advisor from RSM, contact your local RSM office.