Understanding finance and credit as a business owner can be a minefield. But negotiating better rates and fees with your bank could save you tens of thousands of dollars.
Finance credit advisor Peter Cooper has saved self-employed people time, energy and money since starting Control Your Bank (CYB), an online platform that helps businesses critically analyse their banking agreements.
Peter has an extensive background in banking and finance that spans decades. After starting as a 17-year-old, Peter rose through the ranks gaining experience and knowledge of virtually every role within a bank over the course of a 46-year career working for Australian, American and British banks. During the later years, he began to question what else he could be doing for customers.
“I was the State Manager of a bank when they asked me to participate in a redesign,” he says. “There were a lot of things that I thought needed to be changed, and a lot of those changes weren’t made.
“I was disillusioned and decided that I could do more for the customer if I was out on my own. I made the decision to set up my own finance consulting business.”
Peter also saw a general lack of consistency between bank branches, and knew the knowledge and ability of lenders varied greatly.
“Control Your Bank started because self-employed people were never looked after as they should be over the years I was working in the bank. It was very ad-hoc,” he says.
“Between branches you would find that lenders either had the knowledge to support you and help you with your business – or they didn’t.
“It was a lottery in some cases. You had to find a lender who really understood business banking and different employment structures, and someone who could develop you as a business and help you on the journey.”
Competition is king
Peter’s top advice for self-employed entrepreneurs looking for business finance is to find out what the competition has to offer.
“Competition is king. The more players in the game, the more chance you have of getting a better transaction and deal,” he says.
Assessing your business’ weaknesses is also a vital step in the process of signing off on financial deals. Peter says lenders will hone in on these risks, perceived or reality.
“Understand that your business has many strengths and weaknesses,” he says.
“The bank will always zero in on the weaknesses so it’s important that you understand what those weaknesses are, and that you can articulate those risks to the bank to make them feel that they’re safe and they can lend you the money under the terms you want.”
Don’t be afraid to ask for help
If you don’t have a strong grasp on business finance, seeking help is crucial when it comes to negotiating with your bank.
“Generally speaking, people in business – whether you’re a self-employed bricklayer, a general practitioner or a lawyer – are all very good at running their own businesses and focus a lot of their lives on building those businesses. But it’s important to be honest with yourself if you don’t understand finance, and seek help,” he says.
“And not necessarily all from one bank, because all banks are different. Banks have different terms and conditions, different credit managers running those terms and conditions, and different risk profiles for businesses.
“Control Your Bank will help anyone who is self-employed, whether you run a fish-and-chips shop or a multinational, it doesn’t matter.
“It is a tool to make life easy for you as a business owner, to put you in control of the financial side of business and let you run your own business and not get distracted from what you do best.”
The process works by sending Control Your Bank your letter of offer or the roll-over of your loan facility. CYB will analyse that letter of offer and come back to you with any issues they identify with the offer. If the offer is suitable, they’ll advise you to accept it.
“The majority of people that come to us with their offer will get a report to state that it’s not as it should be, and that the bank should be challenged on establishment fees, ongoing fees and charges, interest rate margins or the security of the offering,” he says.
“We give you the tools to negotiate and we are there if you need us to help with that negotiation.”
In Peter’s experience, the majority of people aren’t getting the best offers they could be. He believes banks tend to undervalue their existing client base.
“A doctor who came to Control Your Bank had banked with one of the Big Four for almost his entire life,” he remembers.
“Over that period of time, he built up a number of assets and he was very comfortable in his own personal wealth position.
“When we reviewed his business loan offers, we found he was paying $50,000 a year too much in interest.
“He was busy running his medical practice and just continued to roll over his loan facilities for a number of years, until he came to us and we could point out to him he was paying far too much in interest.”
Peter Cooper will run a workshop on taking back control of your bank at the Brisbane Business Hub (155 Queen St, Brisbane City) on Thursday November 11 from 9-11am. Register for your free ticket here.