In today’s marketplace, you need a financial partner that not only understands your business banking needs but also has the expertise to deliver creative financing solutions with flexible options, competitive pricing and advice that goes beyond traditional financial services.
No matter what industry you’re in or the next great product you think you’re about to unroll, getting a yes from a lender means answering the same questions in your business plan. To help get a yes from your lender, focus on these 10 points:
1) The financing request
Right up front in the executive summary, be clear and specific. Say exactly how much money you want to borrow, what you plan to spend it on and from where you hope to source that money. You don’t want to have a lender guessing or digging around in the back matter of your plan to try to understand your request.
2) Business description
Tell the lender specifically what your product or service is, why it’s needed and what niche it fills. Never leave the lender trying to guess exactly what you’re going to sell. Lenders have a wide range of experience in many industries, but they will not know your business proposition as well as you do, so explain your idea clearly and simply.
3) Financial plan
A lender will want to know your startup costs, what you have already invested (your equity contribution) and your anticipated revenue and expenses. A lender will look closely at these numbers to determine veracity, to know how you will repay the loan and over what timeframe. Finally, a lender will look for a contingency plan.
4) Cash flow projections
Cash flow projections deserve special attention. Over 90% of declined loan applications result from poor cash flow planning or unaddressed cash flow challenges. Support your projections with evidence (contracts for services, letters of intent) and address issues of seasonality, startup and the payment cycle. The best projections come in three variations: cautious, realistic and aggressive; the lender will be most interested in something between cautious and realistic.
5) Security
Security to a lender is a way to recoup an investment if a business fails. But, in smaller businesses, there might be little to offer in the way of security, and few businesses want to tie up personal real estate with their business ventures. There may be equipment in the business over which the lender will want to take a security agreement.
6) Management expertise
A lender will want to know who is on your team to help make the business a success; make sure your plans shows you have assembled the right management expertise to be successful. Small businesses need to be good at three core areas: product/service, marketing/sales and finance; however, most small-business owners know their products really well but struggle with sales and finance. Bring others into your team to make up for this.
7) The marketplace
Now, demonstrate that you know industry factors and trends and why your product or service meets a new need. This is one area where we see business plans fail: analytic types will provide pages of data but not focus on the specific product and niche; big picture entrepreneurs will miss doing this altogether. Mystery shopping, focus groups and checking of market data can help resolve these issues.
8) Market demand
Different from understanding the market place, you also have to address why customers will buy from you and not from your competition. It’s important to articulate your competitive advantage or your unique selling proposition. Ask yourself: would you personally finance this product? Make sure the lender understands why you think this will be successful and why customers will uniquely seek you out.
9) Identify and mitigate risks
Don’t make the lender guess as to what the risks might be: state and mitigate and you’ll be helping your lender say yes. Address what might be some of the biggest risks (e.g.: you don’t meet your sales projections) and offer ways to mitigate (start with less inventory, produce just-in-time, etc.). This exercise will help you determine your business viability.
10) Presentation
A well-organized and clear plan that has a brilliant and succinct executive summary will serve you well. Be enthusiastic, confident and crisp. Get someone fresh to your idea to read it for you and offer feedback on areas that aren’t clear. And don’t dress it up in a fancy package: plain language, plain presentation, well written, and spell-checked – and not too long. •
