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Use More Than One Bank

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A Single Bank Will Stifle Growth

If you are a typical small to medium size business you will have your daily transaction account with one Bank. You will probably use them for your funding facilities such as an overdraft.

The Bank will usually hold a Fixed and Floating charge (now known a General Security Agreement – GSA) over your company. In addition the bank hold security over assets such as the family home and/or a commercial property to support your financing with them.

Your Bank will want to be your “one stop shop” for all your financing needs. Whilst this option suits some small to medium sized businesses there can be some pitfalls to this approach that can constrain a business moving forward.

When a business has its eggs in one basket a situation can arise where their Bank has enough security to support its financing requirements right now. But this may not be the case if they need an urgent increase in their overdraft facility or other facilities.

Most Banks have prudential limits around the amount they can lend against the security they hold, the type of industry or exposure to a particular industry.

So what should you consider?

  • Spread your Finance risk. Where you require finance that falls outside of core operating facilities with your Bank consider placing these with another financier or financiers.
  • Track record – By having finance with other Financiers over time this will provide them with history on you. This may be handy in the future if you wish to change Banks or your Bank cannot assist with your requirements

If you want to talk with us about spreading your finance risk please give us a call on 02 9453 0300.