Bank Lending & Finance
Master the art of securing bank lending for your SME. Expert guidance on managing bank relationships, creating bankable propositions, and navigating the post-crisis lending landscape.
Key Banking Principles for SMEs
Understand Your Bank
See things from your banker's perspective to build stronger relationships
Be Bankable
Become the profitable, easy-to-support business banks want
Create Bankable Propositions
Structure loan applications that banks can approve
Get Expert Help
Use professional advisors when facing lending challenges
Critical insight: Banks are credit risk professionals, not entrepreneurs. Their time horizon is the length of the facility agreed, and the end game is usually a negotiation where power rests on facts, knowledge, and experience.
The Post-Crisis Banking Landscape
The availability and accessibility of bank lending to SME businesses has altered substantially since the credit crunch. Understanding these changes is crucial for successful borrowing.
Pre-Crisis Era
Wave of liquidity and competition drove lending criteria relaxation:
Higher Risk Appetite
Commercial mortgage LTV rose from 60% to 85%
Lower Rates
Competition drove pricing down significantly
Automated Decisions
Credit scoring reduced need for experienced managers
Post-Crisis Reality
Regulatory requirements and capital constraints tightened everything:
Higher Capital Reserves
Banks must hold more capital against loan risk
Rigorous Approval
Credit processes became much more demanding
"Computer Says No"
Automated rejections with limited discretion
The New Normal
Less Money Available
Reduced liquidity in the banking system overall
Higher Costs
More expensive terms to cover regulatory requirements
Tighter Criteria
Only highest quality propositions get approved
What's Achievable and What It Costs
Understanding the "new normal" in lending helps set realistic expectations for funding types, terms, and costs in today's market.
What Banks Actually Provide
Banks are NOT equity investors providing risk capital.
Secured Long-Term Lending
Conservative loan-to-value ratios for business asset purchases
Short-Term Revolving Facilities
Temporary working capital that swings back into credit
High-Quality Proposition Requirements
Strong Presentation
Well-presented by strong business and management team
Appropriate Structure
Funding term matched to asset life
Strong Security
Adequate equity element to cover remaining risk
Clear Serviceability
Strong cash flows demonstrating ability to repay
Realistic Terms Expectations
Business owners need realistic expectations about pricing and security requirements. The lending world has changed enormously since pre-crisis levels.
Pricing Reality
- • Higher margins than pre-crisis levels
- • Arrangement fees and ongoing charges
- • Risk-based pricing structures
- • Regular review and repricing
Security Requirements
- • Personal guarantees often required
- • Charges over business and personal assets
- • Lower loan-to-value ratios
- • Comprehensive covenant packages
Understanding Lenders' Current Priorities
Bank managers' appetite to support applications depends on current policies and their personal positions. Understanding these dynamics improves your chances of success.
Your Bank Manager's Reality
Bank managers are employees with targets, careers to protect, and limited lending authority.
Current Bank Policies:
- • Maintain, don't expand, loan books
- • Focus capital on safest lending only
- • Avoid putting heads above parapet
- • Only support very strong applications
Key insight: The safer the loan, the less bank capital required to back it. This drives preferential treatment for lowest-risk lending.
Different Funders, Different Appetites
While relationship banking benefits have diminished, different lenders still take varying views on applications.
Sector Preferences
Some banks avoid certain sectors entirely
Geographic Exposure
Regional concentration limits affect decisions
Portfolio Balance
Existing exposure influences new lending appetite
Important: A decline may have nothing to do with your application quality. Always shop around or use a finance broker who knows the market.
Understanding Bank Credit Processes
The Credit Committee Reality
Your bank manager typically cannot approve loans themselves. Applications go to credit committees where:
- • Manager's presentation carries weight
- • Management quality is heavily assessed
- • Financial awareness is scrutinized
- • Management information quality matters
First Impression Critical
You never meet the credit committee, so your proposal must speak for you:
- • Only one realistic shot at approval
- • Documentation quality crucial
- • Professional presentation essential
- • No second chances in current climate
CAMPARI: The Banking Assessment Framework
Banks use the established CAMPARI checklist to evaluate all lending applications. Understanding this framework helps you prepare winning proposals.
Character
Does the lender see you as honest, credible, and reliable?
- • Track record and reputation
- • Previous banking relationships
- • Transparency in communications
- • Professional presentation
Ability
Do you have the skills to run the business and achieve the plan?
- • Management experience
- • Industry knowledge
- • Team competency
- • Strategic planning skills
Means
What are you worth and do you have a history of making money?
- • Personal net worth
- • Business profitability history
- • Cash generation ability
- • Financial stability
Purpose
What will you do with the money? Is it feasible and acceptable?
- • Clear business case
- • Appropriate funding match
- • Sector acceptability
- • Strategic rationale
Amount
How much equity are you risking and do you have enough?
- • Personal investment level
- • Project completion funds
- • Contingency reserves
- • Skin-in-the-game demonstration
Repayment
How long do you need the money and how will it be repaid?
- • Cash flow projections
- • Repayment schedule
- • Exit strategy
- • Seasonal considerations
Insurance
What security covers the loan from business or personal assets?
- • Business asset security
- • Personal guarantees
- • Property charges
- • Insurance policies
Critical Insight: Management Focus
Notice how CAMPARI focuses first on the management team and their credibility before examining the lending proposition itself. This highlights the need to ensure you and your business are "backable" as well as the specific project requiring finance.
How K2 Helps Secure Bank Lending
With over 30 years of banking relationships and finance experience, K2 understands what banks want and how to structure proposals that get approved in today's challenging lending environment.
Our Banking Advisory Services
Credit Readiness Assessment
Evaluate your business against banking criteria before approaching lenders
Bankable Proposition Development
Create compelling applications that address all CAMPARI requirements
Bank Relationship Management
Ongoing support to maintain positive banking relationships
Alternative Funding Sources
Access to wider funding markets when bank lending isn't available
Proven Banking Results
Recent Success:
Secured £5m growth funding for manufacturing client by restructuring their proposition and presenting to alternative lenders after main bank declined.
Investment Partnership for Banking Success
When bank lending alone isn't sufficient, K2's investment partnership approach can provide the additional equity or mezzanine funding needed to make deals work.
We combine bank debt with our own investment to optimize capital structures, ensuring businesses get the funding they need while maintaining reasonable bank relationships.
Why Choose K2 for Banking?
- • 30+ years of banking sector experience
- • Established relationships with all major lenders
- • Investment capability to enhance propositions
- • Success-based fee structures available
- • Dedicated partner throughout the process
Your Banking Action Plan
Follow these proven steps to maximize your chances of securing bank lending in today's challenging environment.
Assess Credit Readiness
- • Review CAMPARI criteria
- • Strengthen weak areas
- • Gather required documentation
- • Prepare management accounts
Research Lenders
- • Don't rely on existing bank only
- • Research sector preferences
- • Consider alternative lenders
- • Use finance brokers if needed
Prepare Proposition
- • Professional presentation
- • Address all CAMPARI points
- • Realistic financial projections
- • Clear security package
Execute & Manage
- • Submit to multiple lenders
- • Negotiate best terms
- • Maintain bank relationships
- • Plan future funding needs
Need a Complete Banking Strategy?
Our comprehensive guide includes detailed CAMPARI assessment templates, lender comparison matrices, and step-by-step application processes to maximize your banking success.
Banking & Lending FAQs
Common questions about securing bank lending for UK SMEs
How has bank lending changed since the financial crisis?
Post-crisis banking has seen tighter lending criteria, higher capital requirements, more rigorous approval processes, and reduced discretionary lending. Banks now focus on only the safest lending, with automated systems often replacing relationship-based decisions. Expect higher costs and more security requirements than pre-2008.
What is the CAMPARI framework and why does it matter?
CAMPARI (Character, Ability, Means, Purpose, Amount, Repayment, Insurance) is banking's standard assessment framework for evaluating loan applications. It focuses heavily on management credibility before examining the lending proposition itself. Understanding and addressing each element significantly improves approval chances.
Should I only approach my existing bank for lending?
No. While relationship banking theoretically offers advantages, different lenders have varying risk appetites, sector preferences, and geographic focus. A decline from your bank may reflect their internal policies rather than your application quality. Always shop around or use finance brokers to access the wider market.
What security will banks require for SME lending?
Expect comprehensive security packages including charges over business assets, personal guarantees from directors, and potentially charges over personal assets. Banks typically require lower loan-to-value ratios than pre-crisis, with significant equity contributions from borrowers to demonstrate commitment and reduce bank risk.
How important is the quality of my loan application?
Critical. You typically get only one chance with each lender's credit committee, and you never meet them personally. Your application must be professionally presented, address all CAMPARI criteria, and demonstrate clear repayment ability. Poor presentation can result in rejection regardless of the underlying business quality.
Master Bank Lending for Your SME
With K2's 30+ years of banking experience and proven track record, you get the expertise to navigate today's challenging lending environment and secure the funding your business needs.
Professional banking advisory • CAMPARI assessment templates • Investment partnership available