Why is my bank so slow?

It’s often hard to remember what life was like before COVID-19 given how much has changed in a short space of time. For business owners, however, one thing has remained fairly consistent: the slow pace of dealing with traditional banks. This fact was sensationally emphasised in April when only 1.4% of CBILS applications were successful after three weeks.

The landscape has changed rapidly since April, largely thanks to further government intervention, with the introduction of Bounce Back loans, and pressure on the UK’s banking sector. But why was your bank so slow to help you in the first place and what can you do to speed things up?

A process not created with you in mind

Given that many traditional banks have decades of technology infrastructure layered on top of each other, it’s no surprise that processes are inflexible, bloated and have not quite kept up with the way business owners work and operate. Despite cloud accounting being commonplace in the SME toolkit, for example, many traditional banks still do not integrate into cloud accounting as part of their loan application process.

Background and verification checks are another area where traditional banks lack the pace and flexibility expected by their business banking customers. City AM points out that verification checks can often take months, with an average time for loan applications to complete of around 60 days - and this was before the COVID-19 crisis! Many traditional banks simply were not prepared to handle a spike in application volumes given their fairly heavy reliance on physical documentation and antiquated processes.

How to avoid the negative consequences of a slow application process

Just because your bank of choice may be slow to deal with loan applications does not mean you have to wait around for a response. There are many things you can do to speed up the process and safeguard your business against the consequences of waiting longer than you expected.

1. Make sure your accounting software is up to date

It’s really important that your accounting software is kept as up to date as possible. In particular, make sure that planned expenses and recurring payments are kept up to date in advance of the payment actually being taken. This has downstream benefits of giving you a more accurate picture of your cash flow position (more on this below) as well as simply aiding your ability to cut down on short term expenses. Invoices you issue should also be kept up to date: particularly during the current economic climate, it’s important that changes in the status of invoices you are issuing are reflected in your accounting software. Even small changes, like agreeing a payment date extension with a customer, can have implications in your reporting which could alter whether or not you can access finance.

2. Get ahead by regularly analysing your cash flow position

Keeping your accounting software up to date will allow you to build resilience in your forecasting and overall understanding of your business’s cash position. By maintaining up to date information, you’ll be able to run accurate stress tests on your business, playing around with expected payment dates of invoices and bills in order to get a sense of your short term funding requirements. Using the cash flow forecasting feature in the Muse app, for example, you can build an accurate 30 day forecast by linking directly into your accounting software and bank accounts. You also have the option of adding or removing invoices and expenses within the app to refine and test your assumptions. Doing this regularly will leave you well placed to apply for funding in advance of a cash requirement, should one arise.

Cash flow forecast

3. Look further than your bank for funding

Your bank is not the only finance provider out there! If they are taking a long time to process your application, look to alternative sources of funding for a comparative quote or separate finance product. There are many alternative finance providers who are able to offer flexible finance that may be better suited to your requirements. Selective invoice finance from Muse, for example, allows you to select specific invoices you want to finance against, offering a far more relevant alternative to an expensive short term loan if you have an immediate cash flow need. 

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