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COMMERCIAL PROFILE CREDIT WHERE IT’S DUE


In relation to credit availability for business, considerable time has been devoted to discuss to what degree banks are really ‘supporting business’. “Te fact is that throughout this crisis AIB has remained


‘open for business’ and we will continue to lend to viable busi- nesses throughout 2011 and beyond,” says Deirdre Parkinson, SME propositions manager at AIB. So what does AIB mean when it uses the word ‘viable’? A


viable business is one which is currently in operation and exp- ected to continue to remain trading in the foreseeable future


n Te key aspects of the business plan must stack up, for example: market potential, profitability, sustainability (including cash flow) etc;


with the following common characteristics: n A good track record, good future prospects and financial capability;


n Assurance that the business promoter has the business experience, knowledge and ability to make the proposal work.


“Your relationship with your bank is no different to every


other business relationship where there are mutual responsi- bilities and dependencies,” Parkinson says. “To make an informed credit decision, borrowers need to


furnish their bank with relevant financial information that will support a credit application. Conversely, borrowers should expect no less than a robust evaluation of their needs and alignment of suitable credit facilities to support those needs at a price that is fair and adequately reflects the risk associated with the proposal. “As every business credit proposal is different, AIB’s busi-


ness relationship management team is happy to advise on the specifics of the financial information that is required to sup- port a business credit application.” Recent independent SME research completed by Ipsos


MRBI in November 2010 on behalf of AIB Bank indicates that 35pc of small businesses surveyed requested some form of bank finance in the previous 12 months – a decrease of 4pc on the previous year. Working capital and cash flow are cited as the primary reasons for credit especially for overdrafts, which were requested by 61pc of small businesses. Parkinson says: “Typically, as we have seen from the Ipsos


MRBI research, the most common types of bank-lending products are overdrafts, loans and leasing, with invoice dis- counting beginning to feature more prominently as an effec- tive method of managing the debtors of a business. “Other encouraging trends from this year’s survey indi-


cate an improved approval rate of 61pc overall for overdraft requests and a general improvement in the time taken to pro- cess credit applications. “Further momentum in these positive trends can be achieved


if the business owner can clearly set out his/her current finan- cial position and requirements in the short to medium term so that the bank can match the most appropriate lending product to meet their needs in a timely fashion.”


Deirdre Parkinson TOP TIPS FOR DEALING WITH YOUR BANK


“Te key message from AIB is that we are lending and that we want to continue to lend to viable businesses. Tat said, how- ever, it must be acknowledged that the nature of interaction between the bank and the customer when applying for credit is different and maybe even more rigorous than before,” says Deirdre Parkinson, SME propositions manager at AIB. Tis should not be interpreted as a reluctance to lend but


more a desire to provide the most appropriate support to cus- tomers. Te following tips may help you in demonstrating you


have a viable business and are an acceptable risk: n Spend time in preparing for your meeting with the bank, paying attention to the need to have sufficient informa- tion to support your application


n Work with your bank to agree the best funding mix for your business


n Align the term and type of credit facility to your business’s needs and financial circumstances


n Explore the use of specific financial products to spread large one-off annual costs over the year – it will save you money and help you manage your cash flow


n By all means consider bringing your accountant or financial adviser to the meeting with your bank for collective discussion, understanding and agreement. Parkinson concludes: “Irish business will play a critical role


n Make sure you demonstrate that you can manage your business effectively both in good times and bad, for example, being able to take discerning actions when busi- ness levels are down


in rebuilding national confidence, which is the most essential ingredient for business recovery. AIB fully understands that we need to do much more to support recovery and we are com- mitted to working with business owners to move beyond the current crisis and exploit new opportunities, which will result in more sustainable businesses for the longer term.”


VOL 4 ISSUE 1 2011 OWNER MANAGER 41


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