Getting the Bank to Say Yes to a Loan

Written by Peter Tran

July 29, 2017

Banks and other financial institutions are very valuable
sources of funding
for most new ventures. However, acquiring startup
funding from banks is never an easy process because of their stringent guidelines.

It makes sense for most entrepreneurs to study the funding approach of banks, modify
their funding approach, and then tailor their proposals accordingly in
order to meet the requirements of banks. By doing this, entrepreneurs will greatly
improve their chance of obtaining the desired
seed funding
. Here are some common but requirements of most banks:

a. Prospective cash flow

applying to banks for seed funding or for the eansion of their new
ventures must show sufficient cash flow to make the loan payments. Banks
will often reject applications if a prospective or existing company does not demonstrate

b. Eerience
Another determinant that often works in favor of
is their eerience.
owners should demonstrate they have eerience in the field and are coment
enough to operate the fully. An entrepreneur who has some eerience
running a company and is looking to set up a new will find it much easier
to obtain capital from banks as opposed to one with no previous track record.

c. Assets
Banks also prefer investment opportunities
in new es in which entrepreneurs have financial resees and personal collateral
sufficient to solve any uneected problem. By using their property as collateral
when obtaining a loan, the entrepreneur may increase their chance of securing funding.

d. proposal
Developing a proposal is essential for every
who seeks funding.
Before approaching a bank for startup capital, the entrepreneur must ft devise
a well-detailed plan, focusing not only on the products and seices they
will offer but also on the prospective s that will be generated. The financial
forecast is a very important component of the plan, as it demonstrates
a company’s ability to viably suive while generating returns.

e. “Break-even” analysis
While developing the financial forecast of the new , an
to analyze if and when the new will “break even.” This is the point at
which the cost of eenses of the new is equivalent to the generated.
If financial studies and market research indicate that the new will not
reach the “break even” point, even after five , an entrepreneur should avoid
developing such a . Investment opportunities that do not demonstrate a “break-even”
point after a few will also be extremely limited in terms of
obtaining funding

f. Coment staff and management

An entrepreneur who does not have eerience in operating a can gain credibility
by hiring people who have such eerience.
Business investors
like to see that the new has been able to attract
top staff and management personnel to operate a company.

g. Prospective investors who are interested
Another way to get business capital from banks is by approaching them with a list
of investors who are interested in their proposal. Often times, banks will
agree to invest in a new if they feel that other investors have also seen
potential in it.

f. Credit
New owners can also improve their chances of getting access to capital
resources by improving their credit report. There is no other determining factor
that can hurt an
chance of receiving funding more than a poor credit
history. Credit checks should be made regularly and repaired immediately before
approaching a bank for funding.

There are many different ways in which an
can increase their chances
of obtaining capital from a bank for their new . Ft, they must show that
there is cash flow to ensure that monthly payments will be made on time. Second,
it always helps if the owner has eerience in the field and collateral
to secure their loan. They should also construct a solid plan that demonstrates
a “break even” point. For those
with no eerience, they
can hire management and staff with a strong track record of . Banks may even
provide funding when the prospective entrepreneur can provide the names of investors
who are interested in their given venture. Lastly, a strong credit rating will help
with the loan application.



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