Traditionally the bank manager would be ‘in the driving seat’ when it came to the annual overdraft review (sometimes, now, a more frequent event) in that they would tell you when it was, what information they wanted and organise the meeting. Sometimes that was at short notice but it didn’t matter, it all went smoothly and once facilities were in place they were usually renewed annually.
Now this review discussion is more intense – and with many businesses reliant on their overdraft, it is more critical. Not least as the review on the bank’s side includes whether they are going to continue it at all.
I’ve just been looking at the SME Finance Monitor report on this issue. Of 15,000 businesses sampled a total of 1050 (7%) had gone through an overdraft request or renewal in the last 12 months. Of those, 65% got what they wanted but 368 businesses didn’t (60% didn’t get the overdraft, 40% got less that they needed).
Interestingly only 9% of all interviewed sought any advice prior to the discussion with the bank. The reasons quoted were mainly that they didn’t think that they needed it, they didn’t have time or they didn’t think it would make a difference. The most distinct aspect of the figures for me is that the smaller the business the most likely reason given was that they didn’t know who to go to for advice on this.
Sadly there is no match of data to show here whether taking advice made a difference to success rates. However logic says that it would and my own personal experience backs up that it can make all the difference.
My own bit of advice is to deal with this professionally. That means:
- You be the one most aware of when your overdraft renewal is and put some time aside, well in advance, to think about how you are going to go about that meeting/discussion.
- Think about what you want from the bank over the next year – and about how you can substantiate that (cash flow projections the most obvious way).
- Pull together all the information that you need to ‘tell the story’ of how things have gone since you last met the bank. That may mean you need to hurry up the production of year-end figures. It helps to present the story in a concise document which you can use as a simple presentation to the bank.
- Then ‘you get in the driving seat’ to organise your review date and book the meeting – preferably inviting the bank to see your business. Note that sometimes review dates (for a whole host of reasons) may be out of line with the best time to hold them – the ideal time of course to be on the the back of formal year end figures. That also means giving you time to have looked and reviewed these and decided how to present them (as a banker I had some many meetings where the business owner had only just got the accounts and hadn’t even looked at them). Banks will change these reveiw dates if it makes sense for both parties.
The main message is however that this is an event where it is worth taking some advice – and there are people well equipped to help.