1. You must set up a business account if you're starting up as a limited company, partnership or any other key business structure. Sole traders can use their own personal accounts (or via a new business account - John Smith trading as XYZ).

2. Don't necessarily choose a business bank account simply because you are a personal banking customer. You may well feel more comfortable with a bank you already know personally, but they may not offer the best deal for your business.

3. Make sure you compare several business banking offerings, and compare the costs and charges associated with each one. A good place to start would be Bytestart's small business banking partner, Abbey, offering free day-to-day banking forever.

4. Naturally, only go for banks that have a strong background - names you will have heard of, or even internet banking brands which are owned and operated by the big players.

5. Bank Charges - a key point to consider is how much it will cost you to have a business bank account. You may have a large number of monthly transactions to process, for example, so ensure you know exactly what charges will be levied on your account before signing up. Many major banks provide "free" banking for set periods to new businesses, so this may also be of interest.

6. Online Business Banking - this is an increasingly important service, and most banks now provide an internet service so you can check the status of your account day or night. At Bytestart, and with our previous businesses, this is an essential service. Rather than ringing the bank to check if a payment has been made to your account, you can do this yourself in a fraction of the time.

7. Interest - for obvious reasons, you shouldn't hold out for great returns on your business savings income during the current economic climate, but you can certainly choose a bank which offers either free banking, or zero transaction costs.

8. Small Business Team - go for a bank which has a specialised small business banking unit. The set-up process should be simpler, and dedicated teams will be used to dealing with all types of small business and their specific needs.

Some businesses will require regular contact with their bankers, so you should go with a team you feel you can build a good personal relationship with.

For more information on the practicalities of opening a limited company bank account, read our article here.

Stage 1: Preparing the funding memorandum. To facilitate the loan-processing procedure, it is important that you provide the financial institution with full and complete information on your company. This is to ensure a speedy and smooth processing of your loan application. Before applying, you will need to prepare a business plan.

A funding memorandum is a written plan outlining your vision, mission and strategic objectives of the business. A well-written and structured business plan should encompass and provide relevant information on the business. In addition, it should be clear, simple and concise. It is then converted into a funding memorandum which is basically a business plan written for a lender, having the approach of reviewing a business from a different perspective.

Stage 2: The application process. To expedite the application process, you should submit a duly completed loan application form together with the business plan and include all other relevant documents as required by the financial institution.

Each financial institution has its own loan application forms and checklists. However, most of them require more or less the same list of documents for verification and evaluation.

You should make full disclosure of all financial information about yourself and ensure that it is accurate at the time of your application. Declaration of the correct information will also ensure that your application will be processed in a timely manner.

Financial institutions may carry out interviews and conduct a site visit to your business premises to better understand, verify and assess your financial position.

The questions posed during the interview and site visit relate to the nature of business, management structure and market positioning i.e. market share, competitors, market outlook, future plans and product life cycle.

Stage 3: Assessment of the loan application. The third stage of the consumer credit process is credit evaluation. During this stage, a decision is made to approve or reject the credit facility. Once the information is verified, the financier proceeds to the evaluation stage.

Credit evaluations are not based on a single factor, but upon how an applicant matches a set of lending criteria laid down by the lender. Correspondingly, these criteria inherently reflect the risk-tolerance levels of the credit grantor concerned. In short, these criteria reflect how the lenders want to do business, their business policies, strategies etc.

In addition, banks make use of financial ratios to rate a particular business. Some of the financial ratios used for credit ratings are the percentage in growth of sales year-on-year, as well as profitability and stability ratios to determine the level of net working capital required, while also taking the repayment ability of the said business into consideration.

The broad principles that financial institutions apply to assess your business’s credit risk can be summarised by the 5Cs (which comprise both qualitative and quantitative assessments):

Character

·To lenders, this is the most important requisite and the most difficult to measure precisely. The financier needs to determine the willingness of a potential borrower to repay the loan facility. It must be highlighted that even if a potential borrower has the capacity to make sound repayments, his credit facility may still be declined if there are grounds to suspect or question his willingness to make repayments;

·The factors normally considered in examining a character of potential borrowers include past records or credit history of the borrower; stability and duration of his employment/business; experience and qualification, and reputation.

Capital

·This is a measure of the shareholder’s commitment towards the business. Generally, shareholders who inject larger amounts of capital into the company are deemed more committed to growing the business;

·The client’s capital is determined by his current level of liquid assets, current level of unsecured borrowings and their list of income sources, fixed expenses, as well as contingent liabilities;

·To the lenders, the capitalisation ratio (%) i.e. total net debt over total capitalisation, and tangible net worth over total capitalisation will determine the commitment and debt level of the business and, correspondingly, the size of loan extended.

However, lenders will also look at the industry of the said business and perform a set of benchmark ratios as a reference. For instance, a manufacturing company will have a higher capitalisation debt level compared with a trading company.

Capacity

·Capacity looks into the client’s ability to pay and handle the proposed new level of debt;

·Here, the company’s profitability ratio is analysed by studying the company’s profit margin i.e. gross profit margin and net profit margin;

·The NBIT over sales figures will reveal the company’s ability to service its finance cost from the total debt bearing interest category;

·Liquidation ratios are also analysed at this stage by studying the coverage ratio i.e. total borrowed funds over tangible net worth, which is then used to determine the speed at which a business is able to sell its assets to repay debt;

·It is also determined by past earnings, projected future earnings and past records of meeting financial obligations.

Conditions

·This will prompt the financier to examine whether the client’s employment or business will withstand the vagaries of the economy, social, political and international environments, government regulations, competition or changes in banking policies;

·The turnaround days are analysed at this stage by looking at inventory turnover, the average collection, and the payables period. This will then project the relationship between suppliers and customers and any other issues in regards to collection and payables;

·The lenders will also look into the company’s list of suppliers and customers to determine the business risk with regards to the immediate parties – the supplier and customer.

Collateral

·Collateral is considered only as a cushion for the financier to rely on when there is a default in its primary source of income;

·A financier would prefer that a loan is repaid rather than having to collect proceeds through auction of the collateral;

·Collateral is examined based on its ease of disposability and whether it is adequate as security i.e. fixed deposits are always preferred to fixed assets in terms of disposability factors.

However, banks will obtain satisfying proportions of both assets as mentioned above, in addition to other forms of security – corporate guarantees, director’s guarantees and third-party security documents which are deemed acceptable.

Financial institutions will conduct credit checks and study the patterns of the business current accounts, repayment records of their loans and existing trade facilities. Some financial institutions have their loan evaluation matrix in the form of scores as part of their credit evaluation processes.

Stage 4: Approval of the loan application. Once the financial institution approves your loan, it will issue a letter of offer that sets out a detailed credit facility, interest rate for each facility, collateral and terms and conditions under which the facility will operate.

You will be given a period of acceptance upon receipt of the offer letter. Read and understand all contents therein and revert should you feel that there are contents which are not suitable or in line with your company’s financing objectives for changes thereon. There are times when the intent and discussions of the borrower and the documentation from the lender do not match.

Upon acceptance of the letter of offer, the financial institution will proceed to the documentation stage. Here appointment of professional and legal advisors will take place to satisfy all terms and conditions under the letter of offer, and to prepare for a drawdown of credit facility.

The entire timeline from start to prepare a business plan, converting it into a funding memorandum to final disbursement, provided the checklists are met, usually ranges anywhere from three to six months. The process is faster if the applicant knows what the lenders really look for.

,LI>Girish Ramachandran is executive director of RSM Strategic Business Advisors. He is of the opinion that we would not be in a global financial mess if bankers were instead evaluated and rewarded based on how much returns the loans they disbursed rather than how much loans they gave out. Feedback to this article is welcome.

Are you overspending? Are you saving enough? Are you a spend thrift? Do you know how to expand your wealth? How much do you think you know about money management?

Money management is the process of controlling your money and wealth. There is no doubt that money management is an essential skill that one must pick up in life. Money is very important to anybody living in the modern world today. Many people would agree that it is almost impossible to survive and live normally without money. Whether you live in a developed country or in a 3rd world country, one would have to deal with monetary issues very often. Hence, money is very important in the world today no matter who you are or where you are. Due to the inflation (2007-2008), those who are lacking in money management skills would be feeling the pinch. To prevent this from happening again, we have decided that teenagers and young adults should be educated on money management due to their general lack of experience and knowledge in this area.

"Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give." William A. Ward.

Secrets to Success in Money Management brings up this complicated issue in a simple yet interesting and comprehensive way. Through our guide, you can pick up basic strategies to money management and tips and tricks to help sustain your finance in the long-term. Ultimately, it is a guide that meets your needs.

1 - Start by creating a shared Vision & Mission

As in any business, it's critical for the partners to define the Vision and Mission of the venture as the very first step. If all brains aren't going in the same direction in the same way, problems are bound to arise.

The motives for each partner can be different. The overall objectives and methods, however, need to be the same.

Tom chose to partner with Dominic because each saw the market need for a commercial kitchen facility. Tom was a commercial contractor who had worked on restaurants and catering facilities. Dominic was Manager of a cooking school and well connected within the food preparation industry. Their agreed upon Vision was a 2,000 sq. ft. facility that would have 3 shifts of production, serve as a test kitchen for the cooking school and contract with other long term and project clients.

Tip: Take time to discuss your company's Vision and Mission with your partners. Look for what energizes and motivates each of you about your business. Give it a purpose and define what the ideal business will look like. Put the joint Vision and Mission in writing and use it as the reference for everything else you do.

2 - Make sure each partner's needs and expectations are addressed

Each person in the partnership has his own reasons for being in the partnership. Sometimes people seek a partner for capital, sometimes for expertise, sometimes for connections. These are not always expressed, yet they remain as an underlying expectation. If the expectation isn't met, the relationship can become strained.

Because each person's expertise, motivation and personality are different, it's important to have this discussion before anything is committed contractually.

Because individual needs and expectations may change over time, a clear dissolution or modification plan needs to be in writing also,

Gabe and Rosa had a wholesale distributorship that was limping along. Then Gabe became ill and couldn't work for several months. In the interim Rosa had to carry the entire business alone. While she was able to do so, when Gabe came back he didn't have the energy or motivation to pick up his role again. Rosa wasn't prepared to carry it alone long term. Until they sat down together to discuss expectations, each was feeling let down and soon the bad feelings took over.

Tip: Find out what your partner expects from you in the partnership. Share your expectations as well. Have a plan for when personal or business circumstances or interests change so, when needed, expectations can be readdressed.

3 - Identify and utilize the strengths of each partner

Because partners join forces for a variety of reasons and expectations, sometimes the strengths of each individual may be overlooked. The most obvious strengths will probably be recognized; however, underlying strengths, when brought out can often make a big difference in long term motivation, commitment and success.

Ted and Rudy's restaurant had reached a plateau after two years in business. Ted was in charge of the kitchen, Rudy the business end. With the help of a coach, Rudy realized that one of his personal strengths was his artistic ability and interest. When he decided to connect his art with the business, the average sales were up 35% the first month and another 25% the following month. He used his restaurant as a gallery for himself and guest artists. The restaurant frequently received mention in the art media and related calendars. And Ted was inspired to create "artistic" dishes.

Tip: Bringing out and utilizing the strengths of the individuals within the partnership will add to the motivation, the energy and the odds of long-term success. Make note of your personal strengths and ask your partner to do the same. Then sit together and discuss how you can apply these to the business.

4 - Support the partnership's limitations

In an effort to save money, little things often pile up in areas where partners have neither expertise nor interest. Over time, these can literally sink your business. Limitations can be in any area: strategy, product/service development, marketing and sales, personnel and operations management, financial management and administrative. Wherever they are it's important to identify them as early as possible and have a plan to manage them so they don't get out of hand.

Amanda and Tracy opened an organic spa where all products used and sold were organic. They also offered private consultations for personal wellness. Business was great, but they didn't know how to manage their cash flow. They soon found themselves in a cash crunch with debt that was continuing to build. The answer, of course, is that they needed support with business and financial management. On suggestion from an advisor they hired a business manager who was able to provide support in their area of weakness.

Tip: Look at the areas that are problems for you. Chances are these are areas that could benefit from some extra support. If you think you can't afford it...think again. You can't afford not to support limitations. These gaps are where the value of the business slips away little by little. Don't let it happen to your business.

5 - Set company and individual goals

The ideal way for partners to approach goals is to start with goals for the company, then each create goals for themselves. Individual goals should support the company goals. Goals should measure and support expectations. Writing these is especially important for partners.

Theresa and Irena were on a good track with their two year old specialty marketing business. They verbally set company goals, but didn't consider what each would be accountable for in reaching these goals. When they didn't make their goals they blamed each other and things turned ugly.

Tip: Review and update your company goals together with your partners. Then get each partner to set individual goals that support the company goals in their area of expertise. Put all these in writing and get each to commit to their goals. Then at the end of the period there is no question about who's accountable for what.

6 - Handle disagreements, disappointments and frustrations early.

As in any type of partnership, disagreements will happen. Handling them effectively is the key to keeping the relationship on an even keel and the partnership in good order. Don't let bad feelings build and fester over time. Make it a rule that each can approach the other when something needs to be addressed.

When Art became sidetracked with personal issues and was spending much less time in the business, the relationship became strained. Charlotte didn't want to upset things by challenging how Art was spending his time. She didn't say anything directly to Art, but made negative remarks about how she was "carrying" the business. Charlotte became disenchanted with the business and allowed it to get into bad shape before she finally called for outside help.

Tip: Sometimes it's difficult to approach a partner, especially if it's a long standing relationship that has deteriorated. A regularly scheduled sit down together is definitely a good idea. Once a week is needed in some situations, but minimally once a month allows everyone to come with their agenda. It's always best to talk about what you'd like to see for the business and be positive. Present a plan for change as you see it. That gives everyone something to work with and respond to.

7 - Define job roles for each partner, including accountability

Do you and your partner have written job roles? If not you may be operating under false assumptions. Job roles look a lot like job descriptions in that they carry the connotation: "responsible for" with a list of tasks and outcomes. Lack of clarity around job roles is a major source of frustration and disappointment in many partnerships.

Pamela knew she was the primary sales person for their insurance business. But she expected her partner, Charles, to bring in some of the business, even though that had not been discussed in depth or clarified in writing. When she saw he was handling personal business during regular business hours she became furious. His mental picture of his role was obviously quite different from Pamela's. Discussion and clarification of each job role was definitely in order.

Tip: Clearly define the tasks you will perform and have your partner do the same. From this you can each be accountable to yourselves, to each other and to the business. Where there are uncovered tasks, contract for or hire a specialist. The objective is to make sure all jobs are covered and accountability has been assigned and acknowledged.

Number One - Understanding your customer: This might seem strange to start here as how do you know your customers before you have a business idea in place. The answer is simple - your customers make the business, therefore without customers there is no business. If you have a business idea don't try to develop the idea around what YOU think potential customers will like or need, but find out what your customers actually desire. Too often business owners get an idea in their head and jump right in with both feet. However, they soon find out that their target market does not want what they are offering. Spending both time and money on a project just to see it languish is not the perfect business idea.

Moreover, let's say you don't already have an idea - getting out and understand consumers (those who will eventually become your customers) may lead you to the perfect idea. Knowing what potential consumers need and building products to meets those needs will get customers beating a path to your door - that is a perfect business idea.

Number Two - Passion: Passion here does not mean being fanatical about your product or service. But, it does mean having some interest in what you do. More times than not, you will be spending 15 to 18 hours a day working on your business in the beginning - usually for the first 12 to 18 months (more like 2 years in this economy). You have to constantly be thinking about ways to improve and grow your business as well as be out talking about it to everyone, everywhere. If you end up starting a venture that you don't have passion for, something that does not make you jump out of bed each morning, it will be very hard to put in the hours and energy to make it successful - thus not a perfect business idea.

Number Three - Understand Your Competition: Every business has competition - either direct or indirect. Think about movie theaters. They have direct competition from video rental stores or at home television. They also have indirect competition from any other activity that consumers spend their disposable income on like bowling, paint ball, golf, etc. Anything that people do in their spare time.

Further, some competitors are ruthless. Meaning that if you promote and offer a product that is similar to theirs but at a lower price, these competitors will just lower their price to match or beat you. If they are already established businesses - they may be able to undercut your price enough to drive you out of business.

If you don't know your competition - what they are willing to do to keep you out of their market - you may be spending more of your time in a pricing war then growing your business - not the perfect business idea.

Number Four - Cash Flow: Lots of entrepreneurs enter the business world with great ideas but very poor understanding of the capital it will take to get their venture off the ground. Most will prototype their product or service and understand what it takes to make the product or provide the service but they don't understand the capital it takes to manage the rest of the organization - including marketing (very expensive but extremely necessary), employees (more than just salaries or wages), insurance or supplies and all the little miscellaneous expenses that add up very quickly like phone, internet, computer services, etc. Knowing your total cash flow will help ensure that all of your costs (variable and fixed) can be covered by the business - the perfect business idea. I have seen way too many businesses with great products fail because they could not cover simple expenses like rent or utilities.

Number Five - You: Know who you are. Know your strengths and weaknesses. Know that you are ready, willing and able to do what it takes to make your venture a success. I have worked with many business owners in the past that think all they have to do is hang out their shingle and they have it made. Thus, when it comes down to actually running the business day-to-day - they are unwilling to invest the time, energy or money necessary for success. Thus, know how hard you are willing to work.

Moreover, know your personal financial situation and what you need the business to generate to cover your lifestyle. If you think your business will pay you a great salary from day one - it will not. And, if you need it to, it is not the perfect business idea for you. Take away outside distractions like your personal financial situation - get those in order - thus, when your business concept does materialize - you will be able to solely focus on its conception and growth. In the end providing you the financial security you are seeking - it will be the perfect business idea.