As you would expect one of the top reasons our business management advising services are sought is the need for funding. Although the Small Business Development Center network does;t have money to lend, we are exceptionally good at preparing our clients and facilitating their relationship with a local lender. As we walk them through this process we advise them to focus less on their monetary goal and more on the human elemen-
It's very easy to focus on the bank you submitted your loan request to but if you want to be successful in getting your loan approved start with the person sitting across the desk. In any presentation I do on obtaining financing I always recommend that you put yourself in the shoes of the banker and make it easy for him or her to say yes. Here are some tips:
- Build a relationship: Even if you don't need a loan select a bank you are comfortable with, set up your business deposit accounts and get to know the people at the bank. This will allow you to understand how business is done there and who the go to people are for various things, including loans.
- Make your business plan speak for you: When you apply for financing you need to have a business plan that will stand on its own and clearly layout what you are doing even if you are not there. Typically you will submit your information to a lender somewhere in the process and they will need to send it to someone else to get it reviewed, underwritten and approved. You will probably never see those people so a clear, easy to understand plan will increase your chances of success.
- Don't be creative: This goes along with the previous point but you need to use common formats in both your narrative and financial statements. Think about it this way, if you are the lender and have a stack of loans to work on along with customer follow-up, new business development and various meetings and administrative responsibilities what are you going to do with the request that is difficult to navigate and understand...NEXT. Don't let that happen. Here is some help...Click here for a business plan narrative template Download MyBusinessPlan_NV* ; Click here to a business plan financial projection template (be sure to enable the print macros when asked) Download New Business Financial Plan*
- Don't make the lender look bad: A lender is evaluated in part on the quantity and quality of their loan portfolio. If a loan starts to go bad it ends up on various reports and 'watch lists'. The person that made that loan has their name attached to that loan. This at minimum will put the lender in an uncomfortable position. If there are too many of those it could impact the lender's advancement opportunities, pay and potentially their job. Don't expect someone to take a chance on you if you have holes in your plan.
- Make the lender look good: The corollary of the previous point is that the lender looks good when they bring good business to the bank. Banks don't make money on loans. They make money on the spread between what they pay on deposit accounts and the rates they charge on loans along with fee income from various bank products. Bring more to the table than just a loan request. Bring your business to the bank.
If you are able to differentiate between the logo on the outside of the bank and the person across the desk your chances of getting your loan will increase. Remember, bankers are people too.
Content in this post is taken from Michael Bowers of the Ohio SBDC at Columbus State Community College* and author of Ideas to Deals*
You can also find Tonya on twitter at @TonyaWilson
* This hyperlink goes to a non-government website