Your relationship manager is called Ryan, he has been in the job eleven months, and he covers about two hundred accounts. He is pleasant on the phone. He also cannot approve your overdraft increase, has never visited your premises, and is measured on things you have never seen.
This is not a complaint about banks. It is the operating environment, and businesses that understand it get better answers than businesses that turn up with enthusiasm.
A facility review is a decision, not a renewal
An overdraft is a facility, usually repayable on demand, and usually reviewed annually. The review is not a formality. At each review the bank re-forms a view on whether it wants the exposure, and the answer is allowed to be no even if you have never exceeded the limit.
What the reviewer looks at is narrow and consistent. Turnover through the account, because the bank can see every credit. The pattern of the balance: whether you use the overdraft as working capital that swings back into credit, or whether you are hard against the limit every day, which is called a hardcore balance and is read as a term loan in disguise. Returned direct debits and unpaid items, which are the single loudest signal of distress available to a lender. Your filing history at Companies House, because late accounts suggest either disorganisation or something you would rather not show. Any County Court Judgment. Any HMRC arrangement.
Almost none of that is about your plans. It is about your conduct, and it is all visible without asking you a thing.
They want management accounts, not a story
The second thing to understand is that Ryan is not the decision. Beyond a modest lending limit, your request goes to a credit function that will never meet you, and Ryan's job is to write it up. So the useful question is not whether you have convinced him. It is whether you have given him something he can submit.
What goes in that write-up is numbers. Recent management accounts, ideally monthly and no more than two months old. A cash flow forecast that shows the peak requirement, when it occurs and how it unwinds. Your aged debtor listing. An explanation of any variance from last year that a stranger could follow.
What does not go in is optimism. "We expect a strong spring" is not an input. "Three contracts totalling £84,000 with delivery in April and May, terms of thirty days, customers are all existing accounts who paid in an average of forty-one days last year" is an input.
If you have no management accounts, that is the first job. A business asking for £50,000 of working capital while producing accounts once a year, nine months after the year end, is asking a lender to fund a period it cannot see.
A personal guarantee is a real thing you are signing
Below a certain size, most bank lending to a limited company will be supported by a personal guarantee from the directors. It is worth being unsentimental about what that means: the limited liability you incorporated for does not apply to the guaranteed debt. If the company cannot pay, the bank can pursue you personally, and if your home is the only meaningful asset, that is what is in view.
Some things to check before signing. Is the guarantee capped at a stated amount, or is it an all monies guarantee, covering everything the company ever owes the bank including facilities you take out later? Is it joint and several with your co-directors, which means the bank can recover the whole sum from whichever of you has assets? Does it carry a legal charge over property, which is a different and stronger thing than a guarantee alone? Is there a personal guarantee insurance product available, and does it cost less than the risk?
Take independent legal advice and expect the bank to insist on it, because a guarantee signed without advice is more easily challenged later. Also look at whether the Growth Guarantee Scheme, run through the British Business Bank and accredited lenders, changes the security position. Under its predecessor schemes, government guaranteed a proportion of the lender's loss and lenders were restricted in the security they could take at smaller loan sizes. Terms change between schemes, so ask specifically.
No and not yet are different answers
When a request is declined, ask for the reason and ask what would change it. A well-run relationship produces a specific answer: the peak exposure is too high relative to your net assets, the forecast assumes debtor days you have never achieved, or the last two years of accounts show a loss and the bank needs to see a profitable period.
That is a list of things you can act on. Come back in four months with two quarters of profitable management accounts and a smaller ask, and you are a different proposition.
There are also routes beyond the one bank. Under the Small and Medium Sized Business (Finance Platforms) Regulations 2015, designated banks must offer to refer businesses they decline to designated finance platforms. Invoice finance may suit a business whose problem is debtor days rather than profitability. Asset finance funds equipment against the equipment. Community development finance institutions lend where banks will not. None of these are cheap and all of them are cheaper than not trading.
Finally, small businesses can complain to the Financial Ombudsman Service. Eligibility was widened in April 2019 to cover businesses with annual turnover under £6.5 million, fewer than fifty employees and a balance sheet total under £5 million. Knowing that route exists changes the tone of a difficult conversation slightly in your favour.
Where this shows up in the game
In Business Baron the bank is a character with a memory. Run hard against your limit for a year and the review goes badly even if you never bounced a payment. Turn up with a forecast and a track record and the facility is there when the seasonal dip arrives. Personal guarantees are on the table too, and they matter in the years when things go wrong. Banks behave differently from one decade to the next, as they did.