Making sure that your business plan is watertight is the first step in getting financed by a bank. Here’s how to organise your approach and plan ahead.
By Craig Falck for Africa Report
Photograph:© Gunnar3000 | Dreamstime.com
Believe it or not, while banks are more than happy to lend entrepreneurs and businesses money, they’re equally as happy to stamp your loan application with a big, fat “DECLINED” stamp. Here’s how to get your business plan in order.
When you’re going to the bank to ask them to loan you money for your business, you need to get your ducks in a row and make sure that your documents are flawless. Don’t think you know everything. If you’re a know-it-all, suck up your pride and ask for help. You can go to your lawyer, your accountant, your business advisor, partners, business friends… anyone who has experience in the field. They will be able to assess your plan and take an objective stance and help you to make it better. You will never know everything there is to know about business plans, so we all need help now and again. Also, reading up information in books and on the internet can only help you and put you in a better-off position. Additionally, accountants understand how banks work and they will be able to look at your plan from a financial perspective and advise you on changes you should make. This is important because banks work with figures. And banking people know how to do calculations. If yours don’t quite add up or they’re not spot on, you’ll be declined in a heartbeat.
You need to also give full and complete disclosure and reasons for the loan application. The banks won’t only want to know how much money you’re asking for, they will want to know what you plan on using it for. And don’t think you can pull the wool over their eyes with a made-up story. They have experts in every field, especially when it comes to building. So if you’re planning on building a warehouse or offices or whatever building it is you need, make sure that you get someone good in the industry to quote you. In fact, whatever it is you’re planning on using the money for, make sure that you use a well-known and trusted name in your industry. Perhaps even submit multiple quotes with your loan application so that the banks can see that you’ve done your research and aren’t trying to rip them off.
It’s vital that you also show the bank you will be able to repay the loan. You can’t just say, “Oh, business will be good this year”. There are complex calculations you will need to do or have proof of income that will be sufficient for you to live on and repay the loan instalments. No proof of income, no loan. It’s that simple.
Banks are tough nuts to crack when it comes to asking for a loan. They’ll find the smallest problem and say “no” to you. For that reason, it’s vital to your application that you’ve covered all your bases and have a complete and accurate business plan that will prove you are a worthy applicant and should be granted the loan.
Palosani Investments Ltd
January 30, 2012
The problem with banks nowadays, they are asking for collateral which is easily converted to cash or cash itself. It is a big burden when you submit title deeds of your house or farm.