Business banking unit2

1. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Understanding the Business Customer
Understanding the Customer’s Business
Assessing Customer Needs
Lending in Foreign Business Transactions
Financing Property Developers and Contractors
Financing Agricultural Projects
MODULE COVERAGE
1
Alternative Sources of Business Finance

2. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Customer’s business type and related cash flow
patterns
To further explore the peculiar needs of
customers in different sectors/industries, the
following table presents an example of typical
sectors/industries in which the business
customers belong and their cash flow
patterns.
2

3. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
3
1.Large Retail
Large need for import/ purchase financing before festive seasons
and large amounts of free cash just after the festive seasons.
Typically need large amounts of working capital facilities that can be
accessed as needed with little difficulty before festive seasons, and
attractive short term (say 3 month) deposit terms after the festive
season. Overdraft facilities throughout the year.
3. Production,
Agriculture
2.Production, Industry
Frequent/regular outflows for imports and local purchases of raw
materials and other inputs. The need to store lots of materials
makes them need working capital most of the time. This is because
funds are usually tied up in raw materials, work in progress, raw
materials in transit and finished good waiting to be sold off
Production and cash flow pattern for farmers is mostly characterized
by seasonality. There is a lot of cash after harvest and a shortage of
cash at planting time until the next harvest. They mostly need well
tailored financing that suits their cash flow realities.
Sector Industry Typical cash flow pattern

4. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
4
4.Construction
Companies
Typically, such businesses incur substantial cash-outflows just after
contracts are signed and may sometimes go up to the first
architect’s report/certification when payment by the client falls due.
The cash flows are large and intermittent. They typically need
financing for the purchase of construction materials, labour and
other costs, up to the stages of the architect’s certification. They
therefore need well tailored contract financing. Most preferably for
bankers, there should be other running contracts alongside the
contract to finance.
5. Small & Medium,
Retail
Similar to the large retail, but on a far smaller scale
Sector Industry Typical cash flow pattern
5. Property Developers
Their business is very brisk during harvest seasons of various
products (but also low prices) and low during the off season
(with high prices). They typically need a lot of financing during
the season, to buy and store the produce. During the off-season,
they sell the produce for good profits and they are liquid.

5. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
5
7. Produce Dealers
Their business is very brisk during harvest seasons of various
products (but also low prices) and low during the off season
(with high prices). They typically need a lot of financing during
the season, to buy and store the produce. During the off-season,
they sell the produce for good profits and they are liquid.
8. Exporters
Need working capital facilities to locally purchase/produce the
exportable product or service; usually short term facilities.
Sector Industry Typical cash flow pattern

6. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Tailoring financing to customers’ realities
Many bank loans and other facilities go bad because they are not tailored to
suit the customer needs. In many cases, banks standardize their products
so much that any customer who wants to take facilities just has
alternatives of givens. They do not have the chance to convince the bank
to tailor the facility to suit their particular need. A loan with unsuitable
features given to a customer is the first invitation to default.
Tailoring facilities to customers involves;
1. Understanding the customer’s business
2. Mastery of the cash flow pattern of the customer’s sector or industry
3. Knowledge of permissible flexibility in giving advances
4. Thorough knowledge of the bank’s products and how they can be
packaged for a customer
5. Creativity and innovativeness on the part of the banker
6