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How to secure debt finance from a bank

Ben Barbanel, head of debt finance at OakNorth | 07:27 Wednesday 6th September 2017

At pretty much every industry event I've gone to since I started my career in banking almost 17 years ago, a topic that always comes up is debt finance and how to secure it .

For any fast-growing business, the need for capital is constant so it is important to work with providers that can keep up with their pace. Unfortunately, this excludes most banks who are notoriously slow and often resort to opaque credit processes where the prospective borrower is left in the dark for months at a time.

In this article, I explore some of the ways in which business owners and those who advise them can hopefully speed up this process and increase their chances of securing a loan from a bank.

1. A little DD goes a long way

One of the USPs that we're most proud of is our ability to process complex multi-million-pound loans in a fraction of the time it takes larger lenders, but with the same level of rigorous and robust underwriting that you'd find at a private equity firm. However, we can process transactions even faster if the borrower and their advisers prepare a robust due diligence pack with planning consent, development appraisals, valuations, the business plan, sales forecasts etc.

2. Take time to build an excellent team

Since our launch, we have been focused on one thing – solving the problem of scaling non-standard lending in the UK, backing quality management teams in the process.

One of our recent restaurant deals was a £20m loan to Brasserie Bar Co.

This is an ambitious and entrepreneurial business which, despite uncertain market conditions, has continued to expand every year since inception, even during the recession. The business is celebrating its 21st anniversary this year, yet has managed to stay fresh in an increasingly competitive market by expanding its offering into new formats and settings, and rebranding at the opportune time. The management team – which includes CEO Mark Derry and finance director Helen Melvin – is a perfect example of the kind of team we look to lend to.

3. Cash (flow) is king

Every loan we write at OakNorth is driven by the customer's ability to repay it, which starts and finishes with a healthy cash flow forecast. Typically, our borrowers generate between £5m-100m in annual revenue and must be profitable businesses.

4. Develop a debt-specific business plan

When seeking growth capital, the lines between debt and equity can become blurred. Most transactions are made up of a combination of both, but it's important that business plans are tailored to each. Equity providers are going to be a lot more concerned with the overall growth strategy and where the company expects to be in 10 years' time when investors will be seeking a return. Debt providers, however, will want to see a business plan that's asset-aware and cash-flow focused, and reflects the timeframes they'll be looking at – our average loan term is 18 months to two years.

5. Take a whole-of-market view

The savviest of businesses develop relationships with multiple financial institutions, using multiple providers to ensure they get the best of every product and service. Don't just assume your clearing bank will give you the best deal or complete a loan faster than another provider, do your research and make sure you've considered all your options.

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