How to Prepare Your Company for Bank Financing

When a company needs working capital, equipment, property or financing for expansion, the natural question is “which bank will offer the best terms?”. Before comparing offers, however, there is a more important step: the company needs to be prepared so that the financial logic of the project is clear and supportable.

Define exactly what the funds are needed for

“For growth” is too general. Both the bank and the business manager need to know:

• how much funding is required;
• what it will be used for;
• when it will be drawn down;
• what economic effect is expected;
• which cash flows will be used to service the financing.

For an investment project, the total project value, the company’s own contribution and the amount being sought as external financing should be clearly distinguished.

Make sure the financial statements are in order

Banks analyse the company’s historical performance. Unexplained fluctuations, significant overdue receivables, negative equity or substantial balances with owners will inevitably raise additional questions.

Before applying, it is sensible for the accounting team to check whether the financial statements and current management reports are up to date, whether old balances remain unresolved and whether management can explain the main changes in the business.

Prepare a forecast that can withstand questions

The forecast should connect the new financing with realistic assumptions about sales, margins, costs, payment terms and the investment period. Overly optimistic projections do not make a project stronger.

It is also useful to prepare a conservative scenario: how will the financing be serviced if sales are lower than expected or the investment begins generating returns later than planned?

Present the existing financial obligations

Compile information on current loans, leases, guarantees and other significant financial commitments. New financing should be considered together with the payments the company has already undertaken.

Prepare the documents in advance

The exact documentation depends on the bank and the financing product, but commonly requested information includes financial statements, current accounting reports, ownership or collateral documents, contracts, investment quotations and corporate documents.

When everything is collected only after the application process has started, the process becomes slower and inconsistencies can arise between different versions of the information.

Do not compare interest rates alone

The overall cost and terms can include fees, collateral requirements, turnover commitments, insurance, covenants and other obligations. A lower nominal interest rate does not always mean more suitable financing.

The right financing structure is part of the investment decision

The term of the financing should be logically connected to the useful life of the asset and the business’s ability to generate cash. Financing a long-term asset over an excessively short period can place unnecessary pressure on liquidity.

DESLIN provides Bank Financing Support, including assistance with financial preparation, documentation and communication with banks.

This material is for general information only. Approval, pricing and the terms of financing are determined individually by the relevant financial institution.