We have recently been hearing many stories about how quickly long standing banking relationships have turned to tales of woe. At least one bank has been instructing its managers to review facility letters and loan agreements to identify potential breaches of covenant and "trap" customers into a renegotiation on much less favourable terms. This practice appears to be happening across much of the banking sector and the long standing relationship of mutual trust and confidence which you may have had with your bank manager is likely to disappear if it has not already done so.

At the same time, you should spare a thought for your bank manager sitting on a pile of worthless shares and options and finding it difficult to come to terms with the new order.  The mess is not of his making and he is as much a victim as everyone else.  To ensure that you do not get caught, it is essential that you should check the detailed terms attaching to all of your lending facilities and ensure that you are not breaching your banking covenants. You could be having a record trading year but still fall foul of a “loan to value” covenant because the value of your property has plummeted, for which the lending institutions themselves must of course accept much of the responsibility.

A fact sheet on the Enterprise Finance Guarantee Scheme follows this article. The Banks are slowly getting up to speed with the terms of the Scheme.  If you having any difficulty with your Bank Manager you should ask him to explain precisely and in writing, his Bank’s policy on EFG so that you could quickly escalate your problem to a higher level. Bear in mind that overdraft facilities can be withdrawn immediately and if you are having difficulty with your Bank, do not allow yourself to be intimidated and take advice immediately so that the situation can be rectified before you run out of cash.

Download the Enterprise Finance Guarantee Scheme fact sheet here.

Some of our contact details for your assistance:-

Sandy Finlayson
Senior Partner
Direct Dial: 0131 226 8202
Email: sandy.finlayson@mbmcommercial.co.uk

Stuart Hendry
Partner, Corporate Group
Direct Dial: 0131 226 8203
Email: stuart.hendry@mbmcommercial.co.uk

Kenny Mumford
Partner, Corporate Group
Direct Dial: 0131 8205
Email: kenny.mumford@mbmcommercial.co.uk