Lending Guidelines
We believe it is important for businesses to know how they should be properly treated by their bank and what they need to do during their relationship with their bank. We have therefore created two sets of minimum standards, which outline what you should expect. The Lending Code applies to personal and small business customers, whilst the Lending Principles have been created for larger business customers.
The Lending Code
The Lending Code is a self-regulatory code of practice which sets standards for financial institutions to follow when they are dealing with their personal and small business customers. It provides valuable protection for customers and explains the standards smaller business customers should expect day-to-day and in times of financial difficulty.
The Lending Code is followed by members of the British Bankers’ Association, the Building Societies Association and the UK Cards Association.
It covers:
- Unsecured personal and business loans
- Credit and charge cards
- Overdraft facilities
The full Lending Code is available on the Lending Standards Board Website: http://www.lendingstandardsboard.org.uk/docs/lendingcode.pdf
A leaflet detailing the Codes main protections: ‘A Guide to the Lending Code for Micro-Enterprises’, is available here.
Lending Principles for Larger Businesses
In addition to the Lending Code, the UK’s five largest banks have developed a set of Lending Principles for Larger Businesses. These Principles apply to businesses with a turnover of less than £25 million but do not cover the smaller business segment, which is protected by the Lending Code. The full Lending Code is available on the Lending Standards Board Website: http://www.lendingstandardsboard.org.uk/docs/lendingcode.pdf
The Lending Principles for Larger Businesses set out the minimum standards larger firms can expect when dealing with their banks.
The Lending Principles is available here.
Check List for Applicants
Before applying for finance, you should always consider what type of lending is the best option for you and if you can afford to repay any money you borrow. Potential lenders will assess your ability to repay before they make any decision.
Once you have decided to apply for a loan, this checklist of standard requirements will help ensure you have structured your application in the best way to give your lender the information they need to consider your request fully. Individual banks may provide more detailed guides to help you prepare a lending application so you should always check what additional information you may need, but this checklist provides a good starting point.
The checklist, shown below, can be downloaded here.
(Please note that banks may not ask for all of the information listed below in every case.)
| New and Existing Customers | Start Ups | ||
|---|---|---|---|
| First, outline what you need | |||
| State how much you would like to borrow – because the bank needs to quantify your request | State how much you would like to borrow – because the bank needs to quantify your request | ||
| State why you would like the finance – so the bank can check it is for a suitable business purpose and decide which type of finance best suits your needs | State why you would like the finance – so the bank can check it is for a suitable business purpose and decide which type of finance is best suited to your needs | ||
| State long you would like the finance for – the bank needs to know the term of the loan to help assess affordability and ensure the right finance is suggested for your business needs | State long you would like the finance for – the bank needs to know the term of the loan to help assess affordability and ensure the right finance is suggested for your business needs | ||
| Next, demonstrate your financial viability. This enables the bank to assess your ability to repay the loan. You need to provide: | |||
| Your management accounts | Your cash flow forecast | ||
| Your cash flow forecast | Any assets | ||
| Any assets | Your business plan | ||
| Your business plan | |||
| Any historic accounts | |||
| Finally, disclose any information that might help your application | |||
| Profile the owner and/or management team – this helps the bank assess your capabilities | Profile the owner and/or management team – this helps the bank assess your business capabilities and experience | ||
| The owner’s investment in the business – this shows the owner’s investment relative to the bank’s proposed investment | The owner’s investment in the business – this shows the owners investment relative to the bank’s proposed investment | ||
| Whether or not security is available – this shows whether you have security to support your proposal | Whether or not security is available – this shows whether you have security to support your proposal | ||
| Other business interests – this allows the bank to assess any other commitments you have | |||