You may be forgiven if you think it is more difficult today, as opposed to say 4 or 5 years ago, to get a bank manager to say yes to a request for a loan or other finance for your business.
Whilst arguably there are some projects or ventures that funders are less likely to fund than others, overall the basis of getting finance approved and your bank manager to say yes in essence still remains the same. Few if anyone has ever been fortunate just asking their bank manager for a large sum of money, off the cuff and without going through a rigorous process.
If you want to improve the chance of your request for funding being accepted and for your bank manager to say yes then there are a few simple steps to be taken:
- Don’t leave it until the last minute - chat to your bank manager before you make a formal application
- Involve your accountants at the early stage in advising on your plans and in preparing forecasts and shaping a business plan or funding proposal
- Know how much you need and for what purpose and be able to demonstrate or offer security
- Be realistic about your demands and be able to demonstrate how and over what time period you are going to be able to repay the money
- Don’t forget to include the true cost of borrowing money in your forecasts – many a loan repayment is missed from forecasts
- Be able to provide historic accounts, current management accounts and sound and tested financial forecasts and if you have any skeletons in your closet, be prepared to address these
- Be able to provide a meaningful commentary and illustration as to how funding will affect or support the development of your business
- Identify and see to address any risks or eventualities that may have an adverse effect on your ability to repay any funding – e.g. not securing increased sales, loss of a key customer or supplier or loss of a key member of staff
- Don’t be too prescriptive or focused on one or other funding approach – you may find it better to look at a number of funding solutions or listen to the bank as to the options available – there’s much more to bank finance than just loans and overdrafts.
- Be realistic about the time it may take to secure the finance you need – it invariably takes longer than you think and be able to demonstrate your commitment to the venture
In summary as we approach the exam season, this might be a useful analogy – few of us would have passed an exam without revision/preparation, why then would we expect a bank to say yes without us doing our homework.