This article by our chairman, Malcolm Durham, appeared in the June 1999 issue of Real Business magazine.

You’ve secured a meeting with your bank manager. You’re nervous. You’re wondering what to say to sway him. Remember the CAMPARI acronym.

Character

The bank wants to know that it is lending to a reliable organisation. So don’t be surprised if they won’t provide you with a facility the day you walk through the door. But if the bank knows your Finance Director, this may speed up the process.

Ability

You need to demonstrate experience and your ability to carry on if things get tough. It is actually reassuring for a bank to hear you consider the possibility of sales being 20 per cent below target, so long as you can recover from it.

Margin

The bank will look for a margin over base rate and will tell you that base rate is the cost of funds. Remember, the bank does not borrow all its funds from the Bank of England any more than you are funded entirely by bank funds.

Nevertheless, it is base rates that determine the cost of your funds. A shift in base rates is what affects your costs more than the margin. The margin is fairly fixed and the scale can be generalised as follows:

• One per cent over base (only multinationals need apply).
• One to two per cent over base (good quality property transactions).
• Two to three per cent over base (good quality private companies).
• Three per cent-plus (try elsewhere).

Purpose

You need to show a good reason for borrowing. Supporting losses is not generally acceptable (this is what equity is for), but a short period of losses (say six months) can be. Investment in assets (including stock and debtors) is the name of the game here.

Amount

Some bank managers object to funding a contingency, but others are more realistic. After preparing your spreadsheets, analyse and define where the money is going.

Repayment

You need to show that the funds will be repaid. I know that banks are in business to lend money and that some businesses seem to manage to have a permanent overdraft. But the underlying basis of a loan is that it could be repaid. If it is agreed later that the funds are used elsewhere in the business, then that is the sign of a developing relationship and increased confidence.

Insurance

The bank needs security. As ever, a property in the balance sheet, or supporting personal guarantees, will swing it. Banks are more cautious about security than other lenders. So tailor your approach and expectations accordingly.

Malcolm Durham acts as a part-time finance director to growing companies. Contact him on 020 7512 1110.