Sourcing Bank Finance
For Your Business
Warren Power
Bank of Ireland
[email protected]
12th September
Bank of Ireland is committed to lending to Small
and Medium Sized Enterprises
 In 2013, BoI approved €4bn in new and increased lending for SMEs and
Farmers. This figure does not include restructures
 H1 2014, 32,000 SME credit applications approved, up 7% year on year
 We continue to approve in excess of 85% of all applications received
 BOI providing over 50% of non-property SME lending in the market
 Over 500 businesses and farmers p/w drew down credit with us in 2013
Content – Key Elements
1.The Business Plan
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Purpose and Use
Content
2.Credit Applications
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4.Security
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Why it is needed
Types of Security
Key Questions - Promoter & Purpose
Information Required and why
3.Financials and
Repayment Capacity
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Balance Sheet
Profit and Loss Account
Cashflow Statement
Cashflow Forecast
Working Capital
Projections

Calculation
6.Government SME
Credit Initiatives
5.The Decision and
Appeals Process


Appeal
Credit Review Office
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Government Initiatives
•
Credit Guarantee Scheme
•
Credit Review Office
1. Business Plan – Content
What Constitutes a good Business Plan?
 Your Business Plan should contain the following sections:
–
–
–
–
–
–
Background and description of the business
Management and organisational structure
Market research and marketing plan
Channels of distribution and Sales Management
Operations plan
Financial plan
 Points to note:
– Business plans need to be realistic not overly optimistic
– What If? ……….Sensitivity Analysis and Plan B
2. Credit Application
Key Questions Promoter and Purpose
 Background, experience, skillset of promoter
 What is the purpose of the loan?
 How much is required?
 For how long is the facility required?
 Owners’ cash input into the proposal
 What asset is being financed?
 What type of repayment schedule is required?
 What is the source of the repayments?
 Is the facility secured on the asset being financed?
 What are the key market assumptions – based on the business plan?
2. Credit Application – Information Required
Financial information required by the bank:
 Up to date Financial and Management Accounts
 Cashflow forecast and working capital requirements
 Financial projections
 Confirmation of current tax status
 Personal ‘Statement Of Affairs’ – which sets out the financial position of the
owner
 Any other financial information deemed necessary to that particular
application
2. Why we seek financial information
 Primary focus when analysing financial statements is to establish if
repayment capacity exists at present and is likely to exist throughout the
period of the borrowings
 It helps to quantify the level of risk attaching to existing or proposed
borrowings
 While not the sole indicator of future performance we will review historic
financial and trading figures as part of the application
 We also seek financial forecasts to identify future revenue streams
 What we are really assessing is the business’s ability to service the debt and
ability to do so over the term of the loan
 Stress testing will reflect the robustness of the business repayment capacity
against future increases in interest rates
3.Financials and Repayment Capacity - Calculation
Amount (€)
Profit before Tax
45,000
Plus:
+
+
+
+
Depreciation
Lease Interest Payments (from P & L)
Bank Interest
Non Recurring Expenses
=
Non Recurring Income
Less Grant Amortisation
Cash generated
Less:
6,000
2,000
4,000
10,000
67,000
67,000
Less:
Total Loan Repayments (current & proposed)
Overdraft/Stocking term loan interest
Leasing Payments (for the coming year)
Tax
Drawings/dividends (NB does the drawings figure include tax)
Funds available to service debt
12,000
2,000
10,000
8,000
20,000
15,000
4. Security – Why is it required?
 Bank takes security to mitigate risk but the most important question is
whether the customer can repay the loan
 Level of security dependent upon:
– Extent of the exposure
– Type of facility provided
– Term of facility
– Borrower’s own cash input
– Bank’s evaluation of the level of risk involved
4. Security – Types
 Main Security Types:
– Personal Letters of Guarantee for Limited Company debt – demonstrates
owners’ commitment
– Life Policy
– Debentures – Floating & Fixed
– Lien on Deposits
– Land – Fixed Legal Charge
– Charge on Debtors e.g. invoice discounting
– Asset as Security e.g. leasing
5. The Decision & Appeals Process – Appeal
 We aim to have a decision within 3 working days of an application
 If you are unhappy with the decision you can ask for the application to be
reviewed and appealed on your behalf with any additional information which
may not have been included at the original application submission (internal
appeals process).
 If the decline decision is upheld you should receive a letter outlining the
reason(s) for the decline and advising you of your right to contact the Credit
Review Office
 The Credit Review Office was established to offer independent advice and
arbitration to borrowers who have had their request for credit turned down by
one of the two pillar banks. Businesses who have applied for credit facilities –
(Minimum €1k up to a maximum of €3m). See www.creditreview.ie for
eligibility criteria
 A declined credit application does not negatively affect your or your
company’s credit rating
6. Government Initiatives – the details
 Credit Guarantee Scheme - The purpose of the scheme is to encourage
additional lending to SMEs, not to substitute for conventional lending that will
otherwise have taken place. Eligibility criteria: Viable SMEs that can
demonstrate repayment capacity, but which do not fully meet the Bank’s
credit policy and have been declined due to either:
- Insufficient security for the new/increased lending, or
- Aspects of the SME sector, target market or business model which are deemed
to be high risk under the Bank’s lending criteria
An annual 2% premium is paid to the Government by the borrower for
availing of the scheme
6. Government Initiatives – the details
Credit Review Office
 The Credit Review Office was set up to ensure credit is not refused to viable
businesses with valid propositions
 Customers must fully exhaust the Bank’s internal appeals process prior to
invoking the CRO
 Qualifying customers, who have had their application for credit (or restructure
of facilities) declined, reduced or are not happy with the terms of sanction,
have a right to appeal the decision to the CRO.
 The CRO will undertake an independent and impartial re-evaluation of the
bank’s decision
 The qualifying threshold for SMEs applying for a review by the CRO has
increased to €3m (per transaction) since October 2013.
 The CRO has no regulatory or statutory powers to override the banks lending
decision
 The CRO review process will provide an independent opinion on the lending
decision with either an endorsement of the original outcome or a
recommendation to overturn it and provide the funds
 More information is available at www.cro.ie
13
Bank of Ireland and Your Business
The Next Steps:
 Talk to us – arrange a meeting one to one
 We want to develop a long term banking relationship with you
 We have a full range of business support services available to your business
and will ensure that all of your needs are met
 We want to provide all viable businesses with suitable credit facilities –
adequate funding is available to support all viable and sustainable
businesses
 We are committed to supporting customers in or facing financial difficulty
We are here to support your business and build
relationships now and for the future
Disclaimer
This document has been prepared by Bank of Ireland Business Banking for
informational purposes only. Not to be reproduced without prior permission.
Any information contained herein is believed by the Bank to be accurate and
true but the Bank expresses no representation or warranty of such accuracy
and accepts no responsibility whatsoever for any loss or damage caused by
any act or omission taken as a result of the information contained in this
document. Unless specifically stated otherwise, no prices or rates mentioned
are bids or offers by the Bank to purchase or sell any currencies, securities
or financial instruments. Except as otherwise may be specifically agreed, the
Bank has not acted nor will act as a fiduciary or financial or investment
adviser with respect to any derivative transaction that it has or will execute.
Any investment, trading and hedging decision of a party will be based on its
own judgement and not upon any view expressed by the Bank and shall be
based on an arms length negotiation with the Bank. You should obtain
independent legal advice before making any investment decision.
For information on applying visit:
http://businessbanking.bankofireland.com/
To arrange an appointment contact:
Warren Power, Business Banking, 2
College Green, Dublin 2
Email: [email protected]om
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Bank of Ireland - Local Enterprise Office