In our ongoing series, we will explore essential insights for securing bank financing and what customers should know to enhance their chances of approval. By drawing on practical experiences and industry knowledge, we emphasize the importance of transparency and honesty, viewing banks as critical partners in business ventures.
Recent discussions have highlighted an important concern: instances where bank employees may mislead customers into creating fraudulent financing proposals. Such proposals aim to secure funds but can lead to significant problems, resulting in difficulties that could have been avoided.
The banking sector typically comprises various teams responsible for financing decisions. The business team engages with customers, while the credit team conducts analysis, often without direct customer contact. In larger banks, a risk department may also independently assess clients before recommendations are made.
Funding approvals generally involve individuals outside of the customer recruitment process and can escalate to the CEO or management credit committees, especially concerning larger loans, where board approval may be necessary. This structured approach aims to ensure the accuracy and reliability of the information presented.
Unfortunately, some business teams may resort to fabricating information to influence these committees, leading to unjustifiable approvals. Banks that engage in such practices can face increased non-performing financing (NPF) ratios, reflecting the failures of customers to meet repayment obligations.
However, customers who adhere to the outlined procedures are likely to secure financing without significant hurdles, barring any unscrupulous behavior from bank personnel. It is vital to recognize that commercial banks derive their funding from two primary sources: customer deposits and shareholder investments. Protecting these funds is the paramount responsibility of bank management.
Banks must ensure that any funds distributed as financing are subject to thorough due diligence to confirm recipients’ ability to repay. Since depositors expect immediate access to their funds, borrowers must be capable of fulfilling their obligations to ensure that banks meet their depositors’ needs.
With this foundational understanding, we can focus on the key factors to cultivate a partnership with a bank. Honesty and transparency are essential traits that bankers prioritize when considering financing applications.
To establish a partnership with a bank, customers should open an active account, ensuring that all business proceeds are deposited and payments are processed through this account. Many banks require accounts to show activity for at least six months, with extended cash flow being beneficial.
In the next installment of our series, we will delve deeper into additional characteristics that define a good banking partner and further discuss the significance of being honest and transparent. Stay tuned for more insights.
