Post recession, the banks have been labelled with the word ‘difficult’. It seems that many law firms maintain the policy of minimum contact and disclosure. What is this based on? Dare I suggest one reason might be that the bank will find out just what weaknesses exist in these law firms’ finances?

Some of this non-disclosure however, where it exists, is now offset by the introduction of LLP status which puts some financial information in the public domain.

Turn this around the other way. Why would the bank want you as a customer? They could after all decide that solicitors are a hot potato and that they should steer clear of them, but they do not. In fact, a portfolio of law firms on any relationship manager’s books is to be envied.

Nationally, funds held in solicitors client account amount to billions and the banks make a lot of money from this. There is also money to be made from office accounts, especially where there is an overdraft. And significantly, the liabilities are less onerous than backing a new enterprise of entrepreneurs with little experience of the commercial world. Many if not most firms of solicitors do not negotiate their terms hard enough.

Given all this, why wouldn’t the bank want your business? Open disclosure on the above basis is therefore to be welcomed and the bank might even suggest surprising financial support. Such suggestions can rarely be made by the bank if they are not given the necessary information on a regular basis

But if they feel that they do not know what is going on, and are suspicious about the firm’s finances, they can be less flexible as a result. But let us say that the profit margin is in the lower quartile –perhaps less that 20% of turnover. To a bank it is still profit. They do not seem to be as interested in profits-per-partner as we do. That said I find that they do understand gearing very well.

They will look at the balance sheet and take the view that capital adequacy is important. The cynics would say that they should have put their own house in order given recent experience. But managers locally will still take the correct view. If I am lending you money what have I got to fall back on, and where is my security? Well some of the security to a bank exists on the ability to trade in the future. In this case, work in progress up to six months ahead is not what a bank would expect to achieve from many of its customers. Therefore, the future of solicitor’s order books is rosy indeed.

But do not be frightened. I recall scaring the partners of one firm when I was helping with negotiations and was told that they could never dare speak to their bank manager as I did. But as expected, he respected and accommodated the arguments and demands very well, and the firm in fact became £40,000 a year better off as a result. They wanted to keep the millions of pounds held in the firms client account. They were prepared to offset that against borrowing in a much better way. But of course the stronger you are financially, the better the terms will be. The rates and terms offered should not be accepted as non negotiable because what banks want is you.

One last point on this – it is always worth checking that the banks are paying the correct amounts of interest as mistakes are common.

Mike Gorick is associate director of The Compliance People Ltd.