How to Approach a Bank Manager for a Loan For most of us a trip to see the bank manager is like having a tooth pulled, a necessary evil. It doesn’t matter if you’re looking for finance from $50k or $5m the same feelings apply- a loss of control and failure if you are not successful in your application.
However, the sheer elation of having your application approved gives you the same rush as skydiving from 10,000ft!!! The emotional rollercoaster can be very draining and may even cause you to think twice about whether or not you really do need the funds; or can you reduce costs or even wait another six months. Does it really need to be this way??? The real question is how much time are you willing to invest to increase your chances of being successful with your application?
Here are my key strategies for tilting the scales more in your favour!!!
Strategy #1 – Preparation, Preparation, Preparation
The key here is to wear the bank managers’ shoes and review your application as if someone else were to present it to you. Keep in mind that most applicants are full of enthusiasm, excited about their new venture or expansion plans and usually pretty optimistic that they will be given the ‘green light’. Now the bank manager is typically somewhat restrained with their emotions (please don’t take any offence my friends in the financial services!!) and are not quite jumping out of their skin when they have poorly prepared plan in front of them or if you are not able to answer their questions. You must do your homework and be confident.
Strategy #2 – A Well Constructed Business Plan
It’s a well-known fact that your bank manager really does want to lend you the money and it is really rewarding for all if that happens. Many business entrepreneurs think that they must engage the services of a trusted CA or CPA, and spend more money on an elaborate business plan than they spent on their wife’s engagement ring. All this to impress the bank manager. Well the truth here is that you certainly do need a trusted business advisor on your side and the bank manager will be impressed by the fact that you recognised the need for expert advice in the planning stage. How to select a trusted business advisor is whole other subject.
With the information made available to prospective franchisees through the web, directly from the franchisor and through the Disclosure Document, you should be able to gain information on the key operational matters of which to construct your business plan. Some components are:
- Type of business
- History of the business
- Background of directors
- Objectives and direction of the business
- Operations and location
- Market segment
- Market analysis and marketing plan
- Capital requirements and ROI
- Full description of the products and service offerings
- Cash flow – projections
- Financial analysis
- Customer demographics
- Management Structure – key personnel
Your business plan should also take into account your strengths and weaknesses and how you plan to fill the ‘gap’ in your weaknesses. It may be a case of stating for the record that you intend to hire a manager with different skill sets to balance the operations.
Cash flow is king and you need to be able to demonstrate that you have a reasonable understanding of the projected cash flow and how much working capital is required to maintain the day to day operations.
Finally, your business advisor needs to probe and ask the tough questions about your business plan; ‘like what happens if sales drop by 20%?” and review every aspect of your document, if you do this then your dealings with the bank manager will seem like a walk in the park.
Good luck and remember the key is to pack and re pack that parachute, after all you only get one chance to make sure everything is ready before you step out of the plane!!!!
For more information on preparing business plans please Click here to contact Mark Fernandez, Director of Business Development Alliance