Where next when ‘the computer says no’?

The credit departments in the high street banks and rural lenders currently use a mixture of forecasts and historic data, plus human input to make decisions on lending. Cash flows and profit forecasts are crunched, the clients’ history, experience and plans are analysed and the opinions from the clients’ bank or relationship managers (if they have one) are taken on board. If they all stack up, then it’s likely the credit risk team member will sanction lending. 

A move to automation

To improve decision speed and efficiency, and to cut costs and lending risks, we are now seeing many lenders move towards using more computer-based technology to make automated decisions on lending cases. 

If the bank declines a proposal

It’s bad enough now if a bank declines your proposal where a relationship manager may have been involved. But if, in the future, the verdict is ‘the computer says no’ and there is no relationship manager or nobody at the lender who understands your business to add valuable input to any lending decision, where can you get the finance you need to allow your business to grow?

In all cases, we advise the following:

• Make sure you get your lending proposal right the first time. Once a proposal has been declined it is much harder to get an approval from the same lender. Prior planning to put forward a robust proposal and loan application is needed from the outset.

• Deals below £250,000 are likely to be automated decisions soon, if not already. These proposals need solid figures, projections and a well-thought through and backed up business plan, and an exit plan if the loan must be repaid early due to unforeseen circumstances.

• Private banks and the high net worth divisions of the high street banks, where a more personal relationship still exists, may be a route for deals above £500,000 with an asset base of over £2 million. Their staff are often more likely to have the authority to make lending decisions without deferring to generic lending criteria.

• Alternative lenders can be a solution for deals that fit outside of any high street bank criteria. Well-packaged proposals with projection-led figures, such as new enterprises, can be given a chance with these lenders who look at track record and lending history.

• Get support from consultants who are experienced in the agricultural and rural lending market. They know the intricacies of the many different lenders – their decision-making systems, appetites for different rural sectors and the staff with influence who can play a part in moving a potential ‘no’ to a ‘yes’.

At R&BS, we have access to over 30 different lenders – some using automation to make quick decisions, and some using the more personal approach. From our close relationships with the staff at these lenders, we know which ones are most likely to say ‘yes’ and offer the best rates and terms for our clients.