With new banking regulations, securing business financing now requires more than a strong financial position—it demands fully compliant and meticulously organized documentation. There are more and more stories circulating, where a hard lesson was learnt on the importance of legal documentation.

John’s Loan Application Experience

John and his wife own a small construction business and wanted to expand their operations. Confident in his business’s profitability and well-maintained financial records, John approached his bank for a loan. However, his confidence was shaken when he realised he had overlooked key legal requirements.

Years earlier, John had set up a trust to manage some of his business assets and incorporated his business through a corporate trustee. But John had failed to:

  • Update his trust deed to reflect changes in the business structure and compliance requirements,
  • Transition his corporate trustee from outdated Memorandum and Articles to a modern Company Constitution, and
  • Ensure his bucket company had a valid Company Constitution.

The bank rejected his loan application due to concerns over outdated and disorganised documents, flagging potential compliance risks. Had John’s accountant not stepped in, this rejection would have been recorded as a black mark on his credit history, potentially limiting future financing opportunities. Fortunately, his accountant helped update and organise his trust deed, constitution, and other necessary documents, allowing him to successfully reapply.

 

Consulting Your Accountant Before the Bank

For businesses and trusts, borrowing money requires more than financial acumen—having compliant documentation is essential. Here’s why consulting with us before approaching a bank could be a game-changer:

  1. Document Review and Compliance
    We prioritise your success and ensure your documents are not only compliant with current laws but also organised optimally for your needs. Banks will view outdated or poorly structured documents as red flags, so preparing in advance helps to ensure a favourable assessment.
  2. Understanding the Latest Regulations
    Regulations governing trusts and companies are complex and frequently updated. We stay current on these changes, helping to ensure that your documentation meets all legal requirements and avoiding any last-minute complications during the bank’s review process.
  3. Guidance on Business Structure
    The structure of your business affects how banks evaluate your application. We can offer valuable insights into which business structure—whether sole proprietorship, partnership, trust, or corporate trustee—aligns best with your financing goals, potentially strengthening your application.
  4. Bank Expectations
    Banks expect borrowers to be fully prepared with organised financial records. We can help make sure that your financial statements, tax returns, and forecasts are accurate, up-to-date, and in line with the bank’s requirements.
  5. Leveraging Negotiation Power
    Approaching a bank with organised and compliant documents gives you leverage. Your accountant and financial planner can help you understand loan terms, provide negotiation strategies, and advise on favourable conditions, making sure you are well-prepared for discussions.

 

Final Thoughts: The Bank is Not Your Friend

When seeking financing, well-prepared and compliant documentation is crucial. We ensure that your business’s documentation is not only legally sound but also aligned with your financial goals. Remember: in business financing, the bank’s priority is its own risk assessment. However, we are invested in your success, helping you put your best foot forward in every financing decision.