An Application for Facilities to Bank/lender(s) is a documented presentation of the financing requirements of a Company. It’s important that the application is well presented, all-inclusive, and effective.
The application creates a first impression of the Company and reflects on its business ability and financial planning that’s gone behind the request for the financing facilities.
The Application for Facilities is used by the lenders as a primary source document for their credit assessment of the requested financing. Hence, its vital that the document is well-drafted and clearly describes the rationale of the financing to the lender(s).
A lot is dependent on the Application for Facilities to achieve a Yes from the lender(s) to go ahead with the financing. Hence, diligence is essential while its preparation and drafting.
An effective Application for Facilities shall have the following features:
1. Facility details should be well covered:
The purpose of the Facility, rationale of the Facility, its end usage, and the sources of repayment should be well covered in the Application.
2. Explain how the financing would well place the Company
Describe how would the Facility contribute to the improvement in the company’s overall performance.
3. All-inclusive document
The Application should cover all the details that a lender would require for their credit assessment. Missing information would not reflect well on the company’s groundwork for the Facility.
4. Consistent information flow
The information in the Application should match with the business operations, be consistent in its presentation, and should flow well in the Application.
5. Highlight Strengths
The application should highlight the strengths, present the points that stand out the company from others, and the survival ability of the company during a downtrend.
6. Determines and mitigates risk areas
Determine the risk areas and mitigate them with the rationale to justify the Facility. A miss to mention the risk areas is not seen in a good light by the lenders.
7. Balance document
The application should be a balanced document and should not appear like a corporate brochure or a marketing pitch from the company.
8. Explains the business model
The business model of the company should be well explained and should highlight the feasibility of its operations.
9. Justifies the Business Plan is in sync with market dynamics
Achievability of the business plan is of prime importance to lenders for the repayment of the Facility. The assumptions made for the business plan should be in sync with market reality and should take note of the sensitised scenarios.
10. Drafted with the lenders in mind
Application is presented to the lenders and it’s solely for their consumption. It is prudent that it should be drafted recognising lendersposition.