Exceeding Overdraft Limits

Banks have a distinct advantage over other creditors of a business. The bank knows exactly what funds are on hand and can assess and analyse the flow of funds through the account conducted by the bank.

If the business has borrowed money from the bank, the business owners will have to provide financial information from time to time and the bank will have the ability to demand further information at any time. None of this information is usually available to ordinary suppliers.

A poor relationship with a bank usually stems from non-payment of monies due to the bank or the placing of the bank in a position where it is forced to regularly dishonour cheques.

It is important to remember that a strained relationship with the bank does not, of itself, prove that a company is insolvent, just as a good relationship is not proof of solvency.

Certainly if the bank, having seen the customer’s financial information, is refusing to advance further funds, then the reasons for that action need to be established. It may be, and usually is, the result of the bank’s lack of confidence in the business.