From the Institute of Chartered Accountants

Since the Global Financial Crisis there is strong evidence to suggest the relationship between small to medium sized enterprises and banks has changed. Banks are now tougher to deal with – they are managing their risk profile more stringently. There is an increased use of covenants. Covenants set performance criteria for a business and can relate to earnings, interest ratios, liquidity ratios and the like.

To help manage this, banks now seek a 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 looking for debt amortisation while the concept of 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 re-financing or new financial arrangement consult with your Chartered Accountant to ensure that you can meet the obligations that are placed in the borrowing documentation.