Since the Global Financial Crisis, strong evidence suggests that the relationship between small to medium sized enterprises and banks has changed. Banks are now tougher to deal with as they are managing their risk profile more stringently. Covenants are increasingly being used. Performance criteria for a business relating to earnings, interest ratios, liquidity ratios and the like are set as part of the covenants.
To help manage this, the banks are now seeking higher level of reporting, such as interim accounts, debtor analysis, creditor analysis and a strong focus on ATO compliance obligations – particularly in relation to Business Activity Statement lodgements and payments. Banks are also more keen on debt amortisations while the practice of offering long term interest only loans appears to be coming to an end.
If you are experiencing pressure from your bank, or you are proposing to enter into a refinancing or new financial arrangement, please consult us to ensure that you can meet the obligations that are now common in the loans and borrowings requirements.