Many are of belief that the businessmen are always born with a silver spoon in their mouth. But that is a wrong notion. Yes, some of them have been born in the rich families but for the rest, it is a true story of a self-made business emperor. But how can they be so successful without financial help? Every business man needs to make primary investment and once it clicks, money keeps on rolling. Now there are two reliable sources to get what you need. The first is either friends or family members and the second is the lending institutions. Now let us explore these choices one by one.
Those who like an independent way of living hate to beg from others. They consider it as the last resort. But what if they are rejected outright and shown the door? Will they give up or pull on every string to realize their dreams? The most successful persons in this world have always followed the second path. They have stumbled but their undying spirit has seen them through any crisis. So, let us now have a hard look at the second option and judge whether it makes really a good choice at present and for future.
When you are granted financial help by banks or other lending organizations, you enter into an agreement with your lender. It is a written agreement and not a verbal commitment and covers different aspects including loan amount, interest rate, time of repayment etc. Business loans are granted to help you either make a fresh start or revamp your flagging business. Whatever be the purpose of applying for loans, once it is sanctioned, you are obliged to pay it off within the specified time limit.
Interest rate is one of the most vital components of business loans. A lower figure of interest rate saves a borrower huge bulk. This is the reason why the borrowers are always on lookout for a lender who offers minimum rate of interest. No less important are the flexible terms and conditions regarding loan repayment. Needless to say, there are several parameters to judge before choosing a lender.
Many lending insisting are operating in the market. The eligibility criteria for getting a loan do not differ much from one lender to another. However, when it comes to interest rate, you need to gather information as to who offers loans at the least interest figure. Generally, the interest rate of the government banks is surprisingly low. But the same can not be said about the private sources. However, you can always go into negotiation with the private lenders as to rate reduction to an affordable ease. Make the most of your financial help so that when it comes to clearing the dues, you do not need to conjure up lame excuses to avert the monthly installment.
Do not forget that the bank is a commercial enterprise. They must therefore recover the money lent. A good exercise is to reverse the roles, to put you in the banker’s place, if it was your money that you had to lend, would you do it on the basis of the file presented? In the file, what are the arguments that could convince you if you did not know the company from the inside? What will you need to emphasize during the interview? Having own funds, the personal or family contribution of the entrepreneur can reassure the bank about taking risk. The loan application, to have a chance of success, must also be part of a long-term approach to good communication between the entrepreneur and his banker on the progress of the project.
Some elements must appear in your file. They will have to describe exhaustively the internal environment of the company. You have to convince the professionalism and the experience of the entrepreneur. What is the governance of the company? Who makes the decisions? Who surrounds the entrepreneur? Who is responsible for developing sales and managing production? Who manages? Accompanying networks can help build the case or provide sector benchmarks. We must always say that the banker is a financier, that he does not know all the details of each activity, but that he has certainly already had clients in the sector or that he financed projects of the same type. The contractor must also make a forecast of activity, optimistic but realistic and reasonable compared to the accounting years already recorded. He must then ensure the balance of his project, list all the charges to be taken into account, the collection deadlines and put in front of the volume of business and expected profitability. To summarize, the file loan application must include a solid business plan.
10 bankers tips for entrepreneurs
- Take the time necessary to build the project
- Prepare the presentation interview
- Take care of the shape of the file
- Do not neglect own funds
- Be realistic in activity forecasts
- Do not underestimate the needs
- Close the financing plan from the start
- Give as much importance to the management as to the business
- Be well accompanied by a chartered accountant or an accompanying network
- Make sure of joining the project before talking about rates and guarantees.