excerpts from Country Guide, Nov 2007
As the dollars it takes to run a business keep rising, banks are demanding more business plans or a lot of hard security such as a mortgage on your home.
If you are one of the business’s that a bank is lending to on the basis of your business plan and you have not fully secured it with personal assets, then your bank is expecting you to run your business according to that plan. They will probably ask you or your accountant for quarterly or even monthly meetings to ensure you’re on target.
If you propose these meetings, you are showing that you expect the bank to share their own “business smarts” and may actually help you land the loan.
When a business owner goes into a bank and starts asking them questions, it tells the bank something. First and foremost, it says that the business owner will take the business plan seriously. The bank understands that the owner has read the plan carefully and understands the assumptions that it’s based on and believes in their, and the bank’s, investment in the business.
The amount of data a bank has is massive. Ask them what they know and use that information to benchmark your own operation.
To work with your bank when you are potentially needing additional credit, make sure you hit each of the following six hot buttons. Your proposal must be sound, of course, but these can help ensure you drive home with the money, and do it sooner too:
- Start early: Get off on the right foot by looking and by being organized. Talk to your banker or Bankspeak sooner rather than later, preferably several months before you need the cash to find out what documentation the bank will need and what the process will be.
- Know your plan: Understand your business plan and the assumptions that underlie it. If you just ask your accountant or Bankspeak to write a plan and aren’t involved yourself, the banker will likely know within minutes at your first meeting.
- Show how you intend to use the plan: Bankers are shrewd at telling whether a plan has been put together to be used, or simply to get a loan. If it’s just to get a loan, you’ve sent a signal that you may need extra watching.
- Be a positive listener: In most cases, the banker will question some aspects of your plan. Few plans get approved without at least a bit of tweaking. Don’t be defensive. Instead, talk each point through, and agree to changes where they make the plan better.
- Prepare for what-if’s: Understand the points of risk within your plan and be prepared to discuss what you’ll do to mitigate the effects if something doesn’t go your way. For example, what will you do if an essential employee is lured away, or if your price targets prove too optimistic?
- Show you value business tools: Attend business seminars and courses and be sure your banker knows you think they’re important to your business management.
Bankspeak can help guide you and your business through the process of “managing” your banker, ensuring that you know exactly what they are saying. We will translate the language for both you and your banker. We speak “bank”.