
In Business? You are losing your profit to your bank 😕
A big statement I know. Your bank manager is a good person, right? Well, on the law of averages, she/he probably is a good person.
I used to be a bank lending manager many years ago — over 14 years ago to be exact — so I won’t bad-mouth them too much. I wont tell you which bank. It was only when I stopped being a bank lending manager, and took the plunge into the world of private business myself, that I realised how much money I had lost my previous clients. Not by ill-intent — just by knowing next to nothing about strategies that actually work. The truth is, working for a bank: there is very little training on the ‘real world’ of business, outside of what the bank wants you to achieve for them.
What your bank is, is a product provider. Yes, they are good at this, plain and simple. They provide financial products that help business owners achieve certain outcomes.
What your bank is not — your bank is not good at giving you sound advice. Why do I say this? Well every bank is constrained by what that bank can offer. Ultimately, they want your whole financial life wrapped up with them.
Let me give you an example of a recent client we have dealt with, and the differences we could make to them in our private practice finance consultancy, versus when I was in banking world.
Let’s call the client, ‘Mark’, and his business, X Trade Services.
The business is trading healthily: turning over $5 million per annum with adequate margin for the owner to make a good living. Although, like many businesses, cashflow is always tight and needs to be closely monitored.
Mark was in the middle of buying out his business partner who no longer had synergy with the business. Mark needed money to get this done — obvious progression was speak to the bank and get some $$$ 🤑
And this is exactly what he did — and to be honest, his bank did a satisfactory job on this request. Mark finally walked away with a proposal of having leveraged his home up to its maximum; and then tipping in some extra cash in the business to make up the sum of money required for the business buy-out. Seems fine, right?
Well no, not really. While the result did the job, it would have cost Mark a lot of money.
We sat down with Mark on recommendation by another client: we reviewed Mark’s business and personal position. The way that his finance had been set up will cost him $15,000 — $20,000 a year in lost tax deductions; all his personal assets are on the chopping block from one bank if the business fails; and all of his cashflow has been sucked up from the trading accounts.
But yes — the bank got Mark the money, and got the job done. That is what banks do. However, thinking about a business owner’s financial position in the terms of “just getting it done“, in my view, is a dangerous thing.
So what is done differently?
First of all, the banking product (loan, business transaction account, insurance, trade facility, merchant facility, etc.) is the last piece of the puzzle.
The financial strategy is the key; and this has nothing to do with a bank.
A banking product comes at the end of the process; and, usually, one bank cannot provide everything a business owner needs. They may be good for part of what you need, but rarely all.
So anytime a business owner makes some small or major changes, the following need to be answered every time:
· What’s coming up next in the business?
· What’s coming up next in the business owner’s life? What’s the end game? (Usually, it is not to be in business forever.)
· Is this being structured in the most tax-effective manner?
· What entity in the whole business and personal structure, owns what? Why? Are you protected?
· Is there a better way to do what you already are doing? What small changes to the business or personal balance sheet can make a huge difference over time?
So what was the end result for Mark and X Trade Services?
By re-examining the banking process and making some simple/minor changes to what the bank had proposed, equated to savings of a hefty 6-figure $ sum, over time; and other substantial risk-reduction and cashflow advantages.
Different result; and the job still got done. That’s what we do: anyone can do ‘finance’; but not everyone can do Strategy.

Shayne Cook, Business Development Manager
Ph 07 3391 7055

Presidio Finance Consulting, Level 1, 32 Logan Rd, Woolloongabba Qld 4102 PO Box 1186, Coorparoo DC Q 4151

Presidio Finance Consulting Pty Ltd (ABN 51 128 973 508) is a Full Member of the Mortgage & Finance Association of Australia (MFAA) and holds an Australian Credit Licence number, 391109. Rates are supplied by various lenders and mortgage managers. Connective and Presidio Finance Consulting Pty Ltd takes no further responsibility for their accuracy. All rates are indicative annual rates only, and are subject to change without notice. Rates for residential loans only. Nothing in this sheet states or implies that any credit is available. Other fees and charges may apply. Unless specifically indicated, this email does not constitute formal advice or commitment by the sender of Presidio Finance Consulting Pty Ltd.
As always, we would be very happy to assist any of your family, friends or colleagues with their home or investment loans — please send them to us for a no-obligation consultation.
