M&G Stores

For prospective borrowers and their accountants, a bank that strives to turn no into yes whenever it's prudent to do so is a big advantage. Time and expertise go into an application for business finance – a proactive bank ensures that this effort is more likely to bear fruit.

Take the example of M&G Stores in Merseyside. Its initial application was not certain of approval until a member of the credit team at Barclays stepped forward with a new proposal that was both bigger and better for the Bootle-based convenience store.

M&G wanted to take out a commercial mortgage*, secured on its current store, to pay for a 10-year-lease on a second store. As Ian Prichard, the Barclays credit manager says: "The proposal was for £170,000 on the lease plus 10 years' rent at £40,000 a year – £570,000 in total. At the end of the 10 years our customer would get nothing for his investment and he has to hand the property back. We asked – is that the right deal for the customer?"

In this case, the answer was 'Probably not'. "Looking out for the best interests of the customer is what Barclays revolves around," says Ian. "We want to lend responsibly for the good of both the customer and the bank, and in doing so we look out for the customers' better interests."

Ian suggested that M&G borrow more than they had originally planned to buy the freehold of the property. "This was quite a radical suggestion," says Ian. "We can often suggest very subtle changes to the customer's application to make the answer yes. Which is what we want to do at the end of the day.

"Our prime concern is can the customer afford what they're asking us for? That's why, in this case, we were prepared to offer a bit more."

Ian recommends that any business applying for a loan considers affordability. The general rule of thumb is that profit should cover debt costs with a suitable margin. "Also, consider 'What if?' contingencies," says Ian. "If the worst case scenario is still giving you some decent debt service cover then this can be reassuring. You need a little bit of margin for error."

For M&G Stores, affordability wasn't an issue and its owner recognised that buying the freehold was a smart move commercially. An initial price of £375,000 was agreed and the Barclays' valuation process began. Again, this was to work very much in M&G's favour.

A commercial surveyor valued the property at £325,000 – a full £50,000 less than the vendor's asking price. M & G was able to renegotiate such that this entire sum was reflected in a lower purchase price.

Which is further proof that when it comes to business lending, choosing the right bank can reap unexpected, but welcome, rewards.

For more on Barclays Business loans, overdrafts and mortgages, visit the Barclays website.

*Property used as security, which may include your home, may be repossessed if you do not keep up repayments on your mortgage.