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Negotiating With Your Bank

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When you are facing debt and cash flow problems, it is essential that you speak to the bank and make an appointment to see someone for advice if possible. There are a number of options that you could consider putting to the bank.

Remember, it is important that you have viable proposals to put to the bank when you meet an adviser. This should include a simple business plan, which you can prepare yourself.

This does not need to be extensive or have a formal structure, but essentially needs to contain:

your business and household budget (recorded in your budget sheet) together with a schedule of your debts;

a plan of how you see the business recovering over the next 12 months (at least). This should include a mixture of figures and words;
any changes you are making to improve income and reduce costs. BUT be realistic; don’t make your projections over-optimistic. Base them on facts that you can support;
a proposal on finance arrangements to help with immediate cash problems and to support your new business plan.

Your local enterprise agency may be able to provide help with the preparation of a business plan – phone your local Business Link or Chamber of Commerce for details of what’s available in your area.

You are not preparing a business plan just for the bank – first and foremost this business plan is for your own peace of mind and as such should demonstrate to you that you can trade out of your difficulties and improve your business performance.

Naturally, the proposals you put forward, and the bank’s response, will depend on your circumstances. Phone us for advice.

Beware if the bank wishes to convert unsecured borrowing to that secured on your property. Always check the interest rate and any arrangement fees that are to be charged. If you are unable to make the payments on a secured loan, your property will be at risk. If you are considering this option, phone us for advice.

It is important that creditors are treated fairly. If the bank will be taking all the money that would be available for your creditors, meaning you may, for example, not be able to pay some other creditors (especially priority creditors), phone us for advice.

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Should I Consider Changing My Bank?

Many people ask us this question. Changing your bank is not as easy as it sounds. Also in our experience it is generally better to stay with your current bank as it knows you and is more likely to listen to your problems and help with your proposals. Obviously this is not always the case, and in some circumstances changing banks may be appropriate.

If your bank will not listen to you and you are losing control of your banking, provided the overdraft and/or loan are unsecured, it may be better to open an account at another bank.

If you have a poor credit history you may find it difficult to open another business bank account. Any new account should be operated strictly in credit to avoid running up another debt and making your problems worse.

If you are able to open a new account, you should treat your other bank’s overdraft and/or loan as a secondary debt (unless it’s secured, in which case it is a priority).

Always try to come to an agreement with your existing bank first. If you are in doubt or you would like more details on any of the above, phone us for advice.

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