What the bank must know to keep you afloat after fire or flood.
The prudent director has a considered survival plan before disaster, such as flood or fire, strikes. You need to act quickly and cash-flow may be critical. Your bank may be the key, so consider the actions that assist the bank to stay with you.
Tell the bank about the action you have taken. This shows the manager that you are acting positively. Stop all non-essential payments, even cheques. The manager will help to meet immediate cash needs and will advise you.
Inform the bank about insurance. A verbal 'we are covered' is inadequate.
Ask your insurance broker to give details from the policy schedule. Confirm in writing with details of the claim to be made.
Review the survival plan. What cash help do I need? What funds are required to recommence trading? Who must I pay? Who is non-essential? Who will be covered by insurance? What security is there for bank debts? Do I need a loan or overdraft?
Show the bank your plan - hopefully within a week. Explain how you arrived at the decisions and why it will work. Seek the manager's approval. Also keep the bank fully informed and make sure that its concerns are answered.
Consider the bank's problem. This helps you to consider the degree of support that the bank can give. Don't be daunted if the manager needs more information. Managers have to report to someone else and may have to seek approval for the survival plan.
Only issue cheques from available funds. This shows the bank that you are in control of cash. Ask the bank before issuing cheques outside any agreement. Even if the full amount cannot be paid, it may be possible to pay enough to ensure survival.
Tony Greenman is director of The Banking Liaison Group 0171 936 2758.