How To Get Your Bank To Finance Your Business
Banks do not make it a habit to reject project proposals and businesses plans but they have a number of factors that they look at before they give you that loan. They have no obligation to finance small businesses but they take time to see if the business is worth financing. For the purposes of finding finance for your business venture, you need to know what your bank is going to look at.
Banks look at how many other banks are in your portfolio. Once you have too many bank relationships, the bank will not be comfortable financing you as it may breed resentment and it may restrict their opportunities. In other words, they look at the competition, assess it and then make their decision.
Honesty and Trust is also important to the banks when they deal with you. You must know that in finding your finance, you need to be transparent and lay everything on the table. This is important in areas such as loan agreements and warranties. Making a promise to deliver something that is a milestone to you is being dishonest. The objective is not to impress your bank, but is finding finance for your business.
Make sure the information that you give them is accurate, particularly in your business plan. Your accounting systems should leave no room for uncertainty from the bank’s side. Your reporting systems should ensure your bank on your ability to pay your debt. Forecasts, and budgets all form part of your accounting and reporting systems.
Remember that this is not a once off deal with the bank. It is along term commitment that you have to get into. This means you are investing time, attention and money to the bank. Commitment in anything needs both sides to work at it. Finding finance for your business and then keeping the avenues open for future investment should not be difficult once you maintain this relationship.
Before you approach your bank, you need to answer some personal questions such as why you want to borrow and the objectives that you have set out for your business. The type of finance that will be suitable for your business venture also needs to be assessed and the amount of money you want to borrow. You need to know if you are going to be able to pay the money back and what security you can offer. Once you address all these issues, you are able to approach your bank with confidence and be in a better position to answer questions that can among along.
Prepare a business plan and show it to your accountant who will help you iron out the areas that are not up to scratch. Second opinions from professionals are very important as they may pick up the bad areas in your business plan that you might have overlooked.