Getting the Money You Need

Family and friends have wished you good luck, and your father repeatedly warned you that the banker will be asking you a hundred and one questions. And while he's drilling you on assets and liabilities, he's going to be observing your body language, your ability to communicate and your self-confidence. He's also going to determine, in just a matter of minutes, whether or not you have the savoir-faire to make your business succeed. It is the bank's money, after all, so why should he take any chances on you? Unless you're one of those fortunate and sophisticated entrepreneurs who have several years' business experience and can manage to convince a group of investors to put in a percentage of the capital required, you have no choice but take your dream project to the local bank.

A good thing to remember is that your first meeting with the banker can make all the difference in whether or not you're getting the money you need.

Key Ingredients for Obtaining Financing

Feasibility study - no banker will want to bet on your declarations that 'this product will revolutionize society', or 'this idea will sell like hotcakes that I'll make a profit after only two weeks', or else, 'this business is the only one of its kind here and people will be lining up at my door for a slice of the action!' Without a feasibility study clearly showing that you have a niche and a potential client base, the banker can only chuckle. He's heard those claims a thousand times before. You have to do better by showing him that you have done your homework, complete with budget projections to support your proposal.

Credit worthiness - just as important as a feasibility study, your credit history will tell the banker whether or not you are capable of paying back the loan. Have you paid your bills on time? Have you ever defaulted on a loan? Have you gone beyond your credit card limit?

Security/collateral - do you have stocks and bonds that you can put up as collateral to protect the interests of the bank? Do you have a loan co-signer who can guarantee that should you fail to make a payment, he or she can make the payment on your behalf? Would you be willing to take out loan insurance in case the inevitable happens?

Legal and accounting support - the bank may be persuaded that you have adequately prepared for your business by showing proof that you have a lawyer and accountant to look after your documentation requirements. These documents can either be a permit or license to sell your business product or service, or registration papers to demonstrate that your business is a legal entity and will be paying taxes.

The four elements above constitute some of the key determinants for obtaining the financing you need. All banks are not the same - some are more demanding than others. Bankruptcies have been a bitter pill to swallow for most bankers. Show your banker that your business is headed the other direction and is on solid ground.