GUIDE TO BUSINESS BORROWING

HELPING YOU FIND THE RIGHT FINANCE FOR YOUR BUSINESS

Guide to Business Borrowing

Whether you’re a business start-up or an already established business venture getting access to the right type of finance can be crucial if you want to grow, invest and create jobs. To help you make an informed decision, this guide outlines some of the different types of solutions on offer, along with how to apply and what other support is available.

Exploring your options

The key to deciding which type of finance is right for your business is to understand the different options available to you.

Firstly, there are two main categories of finance - working capital finance and asset finance (goods of a capital nature)
Working capital finance means you borrow money for the running of the day to day business operations and pay it back from incoming sales receipts or payments from debtors with bank interest paid every six months
The financing of goods and products of a capital nature (asset finance) is usually spread over a longer period of years as it could be paid back gradually from profits and repayment spread on a monthly or quarterly basis.

Once you've decided what type of finance is right for your business, you can start to look at the specific borrowing solutions available to you.

Working Capital financing

Working capital finance can be used to fund short-term working capital requirement (eg to purchase stock/and extend credit terms to debtors). As your business grows your needs change and consequently your working capital finance needs will also change. To assist you in growing your business, you may benefit from a combination of different products offered by HSBC Bank Malta PLC at any one time.

What are the key working capital finance options?

There is a wide range of working capital finance which can fit your requirements - below are some of the options available with HSBC Bank Malta PLC.

Overdrafts - suitable for short-term cash flow fluctuations, this flexible borrowing facility is usually placed at your disposal and reviewed every 12 months
Business credit cards - suitable for day-to-day expenses and can offer benefits like an interest-free period
Invoice finance – suitable for improving cash flow by raising cash against invoices
Bid Bonds/Performance Guarantees and other Trade Related Guarantees – suitable for bidding for and undertaking tenders on Government & Local Council projects.
Letters of Credit and Bills for Collection – to safeguard your imports and exports.

Asset Finance

Are there any alternative sources finance options?

There are other sources of finance available on the market and we recommend that you should first discuss such requirements with your financial advisor.

We recommend as well that you:

visit the Malta Enterprise website
check for any Government and EU institutions’ announcements, which may be published from time to time, for any other alternative sources of finances, schemes and grants

Supplying the right information

You can help us assess your application as quickly and as smoothly as possible by making sure you have all the relevant business information and documents. Depending on whether you already bank with us, are a new customer or starting up your business, here's a guide to what we may ask to see.

Essential information


What we need	Why we need it
Details about you and your business	To gain a full understanding of your business, plus how your skills and experience will help achieve your plans
Amount invested in the business	To establish the proportion of your investment in the business when compared to amount of borrowing requested.
Purpose	To know how your planned borrowing fits in with your plans and discuss your finance options.
Amount	To determine if the amount you're applying for is appropriate and sufficient to help business perform in the most suitable way
Term	To discuss the time period over which the borrowing is required, helping us assess your finance options and your ability to repay
Repayment	To understand how you intend to repay the borrowing and be confident of your ability to do so (eg from trading profits, cashflow projections and/or asset disposal) For a new business this may be set out in a business plan and cash flow forecasts For established businesses this is usually the assessment of the historic trading figures, current turnover, as well as plans and projections

Supporting information

Some of the following may be required to help us assess affordability and your ability to make repayments. The more finance you're applying for, the more information and documents we may need to see.


What we usually ask for	Why we need it
Other business interests	To know what other commitments you or your management team has, so we can assess how much attention and focus the business will have.
Cash flow forecast, projected Profit and Loss and balance Sheet and business plans	To demonstrate your ability to think logically about your business strategy and business model.
Management accounts and historic accounts	To see evidence of past financial performance (not applicable to start-ups).
Security/assets	To seek some form of appropriate security, such as guarantees, property or other assets that are easy to value and realise.

How we assess your application

Once you've submitted an application for one of our products, the next stage of the process is for us to fairly and openly assess the risks involved in lending to your business.

Tips how to improve the performance of an existing bank account

It's never too early to start taking practical steps to improving and maintaining a healthy performance of your business account as it will increase your chances of being accepted for business finance in the future. Here are some pointers you can consider to improve the account performance:

Do's

Make sure that all business turnover (deposits) is routed through your account regularly and is in line with the receipts of your business
Ensure that if you have an existing overdraft, your account balance is well conducted and that you don't rely on your overdraft more than is expected in your line of business
Honour any loan commitments on time

Don'ts

Pay credits into your account irregularly or not in line with your business performance or have periods with no credits at all
Exceed overdraft limit or overdraw your account without prior Bank approval
Exceed overdraft limit or overdraw your account without prior Bank approval
Keep the account always overdrawn with balances close to the account limit as this may indicate that you're not managing cash flow effectively
Issue cheques or other payment instructions when there are insufficient funds in your account

Bear in mind that if you have a personal account with us, that account is also included in our overall assessment of any borrowing request you make. Also, the earlier you approach us to discuss any future requirements or issues that you anticipate, the more options we may have to help address them with you.