Successful financing is measured not only in terms of the quantity of funds obtained - though this can be of prime importance - but also the quality. The cost of the funds, the terms and conditions of the loan, and the collateral required are of equal importance. If the cost is prohibitive or the terms unusually demanding or unrealistic, then the financing could do more harm than good. For this reason, it is important to be thoroughly familiar with the scope and limitations of the financing system.

Choosing a Financial Institution

Whether just starting out in business or contemplating a change, choosing a financier requires careful consideration of structure, services, and personnel. None of these factors has a direct correlation to loan interest rates, but the right answers to the following questions will help you find a satisfactory relationship with your financial institution.

Structure

• Is the location convenient, or can you do daily banking at a local branch for immediate recording on your central account?
  
• Is the branch a commercial centre rather than a local retail convenience centre?
  
• Do local personnel have a reasonably high discretionary approval level?
  
• Does the organization have a national or international branch network if that would be of importance to your business?

Services

• Does the financial institution offer special non-banking services, such as computer payroll processing?
  
• Are there head office industry specialists available for counsel and assistance?
  
• As your company grows, can the financial organization meet expanded requirements, perhaps in the area of venture capital?
  
• Does the financial institution regularly summarize terms and conditions of loans and credits in writing?

Personnel

• Historically, is it their policy to provide continuity of staff in the operating branch?
  
• Has staff had direct business experience to supplement their understanding of the dynamics of business?
  
• Do staff show an interest in your business, including visiting you on a periodic basis at your place of business?
  
• Do the personnel use local contacts, such as products, customers, and suppliers for your benefit?

Confidence

In seeking financing, perhaps the most significant attitude for both borrower and lender is one of confidence. The borrower must have confidence in his or her business and in the financial institution so as to approach the lender in a positive manner. The lender must have sufficient confidence - or be persuaded to acquire it - in the management, product, business plans, and strategies of the applicant.

Fair and Competitive

Terms and conditions of loans and other services are excluded from this list of considerations. It goes without saying they should be both fair and competitive. However, the other factors may be more significant to a mutually beneficial relationship with your financiers than a fractional reduction in an interest rate.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.

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