Writing a plan

What we look for when we lend

Santander outlines its approach to business loan applications – so you can improve your chances of getting the funding you need.

Q: What are the basic elements under review when considering a loan application?

A: Santander, like most banks, follows ‘CAMPARI’ guidelines when analysing the credit of a business – Character, Ability to repay, Margin, Purpose of the loan, Amount of the loan, Repayment terms, and Insurance. This gives us a rounded picture of what impact a loan will have on a business, and allows us to identify any limits to repayment. We aim to discover if a loan is the best solution for achieving what a business wants to achieve and, if so, how to structure the lending to best benefit that business.

Q: What should businesses prepare before submitting a loan application?

A: All businesses should prepare a comprehensive business plan outlining its current situation, and forecasting aims and objectives for coming years. In particular, it should be made clear what any funding will be used for, and where the money will be coming from to allow future repayment. The more thorough the plan, the more professional your application will seem – it could also mean you get a decision quicker.

Q: What financial information will be asked for?

A: We may ask you to provide us with management accounts, budgets and projections, and we’ll also look at your published accounts, ratings and broker reports. This gives us a good idea of both the sustainability and reputation of your business, and how well it can deal with the economic climate. Again, you could include this information in your business plan.

Q: How do you assess risk associated with a loan?

A: We have a series of ratios to assess the ability of a business to repay a loan. First, the Debt Service Ratio is used to work out whether your available cash flow would meet all of your interest and principal payments, then the Gearing Ratio calculates what proportion of your total business capital the loan will be. Finally, the Interest Cover Ratio will be applied to see how many times your business can cover its interest costs from its operating profit. We may also require external due diligence if a transaction is highly leveraged or specialised.

Q: What else should businesses keep in mind when seeking lending?

A: Santander wants to make sure the final lending decision is in the best interest of both the business and the bank. A sensible and measured approach should be taken to any sort of loan, particularly in the current economic climate. Be honest about why your business needs the loan, and lower your risk profile by reducing any debts, strengthening your management, or even changing suppliers. Also, in difficult economic times, cash is key, so increasing your cash buffer will give you a better chance of obtaining lending.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK