Securing a loan to fire up your business might require a sharp suit and good handshake in addition to hard evidence of a solid plan for success. Banking and finance expert matthew nolan provides advice on how to win over your lender.
It can be easy to forget today that your bank manager needs to lend money to meet their sales targets, earn a bonus and ultimately make a profit for their employer. The global finance crisis might make it seem that securing finance for your fashion business is harder than ever, but this couldn’t be further from the truth... if you have the right stuff.
To successfully get financiers fighting to provide you with loans, you need to help them overcome their basic fear – that they may not get their money back. With the right presentation and information, this is easier than it often appears.
Once you’ve shortlisted relevant lenders, you’ll have to convey to each of them your solid business knowledge and realistic plans that make you an attractive customer. This is typically done through a presentation on your company during an initial meeting and then providing potential lenders with a package of detailed written material.
The presentation
Most lenders require a face-to-face meeting and follow-up phone calls as part of their assessment process. This means that as well as selling the strength of your business, you’ll also be selling yourself.
First impressions count
Business attire is always the safest bet. Also, be on time for your appointment – it shows you’re serious about securing finance while highlighting your respect of the person you’re meeting.
Present confidently
Although you might find the experience a little daunting, the better prepared you are, the more settled you’ll feel. Most funders will be particularly interested in your financials, but also management, experience, qualifications and the direction of both your business and its industry, so consider how you might present each aspect of your business.
Demonstrate a strong understanding
Prepare for possible questions regarding your business, which may include;
• How much funding do you require?
• How long will you need it for?
• What additional revenue will be generated through the loan?
• When and how will you pay back the loan?
• What risks are there and how will you mitigate them?
• What were the reasons behind any prior loan defaults?
The package
Your interview is an important part of the process, but the written material you leave behind will be your lender’s main point of ongoing reference. This is especially important, as the person you met may not be the one providing ultimate approval of your loan, making these documents the loan assessors’ only opportunity to learn about your business.
Your financials
The current financials for your business, including balance sheet and profit & loss are essential; interim financials – if your current financials are over three to four months old – are also useful.
Business plan
A well-written plan should concisely convey the core aspects of your business and future plans in a professional and reader-friendly manner.
• Provide a brief overview on your business, including name, address, owners, nature, history, structure, related companies, number of employees and current business assets. This will provide your lender an instant snapshot of who you are and what your business is about. Profile your business’s owners and senior management, including their education, experience, skills and professional accomplishments. Highlighting your business’s knowledge base and industry experience will help establish your business as a low-risk customer.
• Describe your customers and how your product meets a market need. Demonstrating your business’s ‘points of difference’ will also assist.
• Explain exactly how much funding you will need, how you will spend it and how long you will need it for.
• Outline your goals in terms of sales, income, business operations, marketing strategies, cash-flow expectations and cash-flow projections for the next three years. Substantiate these expectations through your business’s financial documentation from the past three years and include a plan that details how you will comfortably pay off the loan.
• Detail the collateral you are willing to pledge as security.
• Identify the risks: lenders want to know that you’ve assessed the risks and have contingency plans in place to cope with them.
Enhance your reputation
Collateral information such as brochures, copies of ads, newspaper and magazine articles, client testimonials, references and other promotional material. These not only enhance the profile and perceived professionalism of your company, they also highlight your approach to business development.
Lenders need to be confident in your ability to repay a loan. Taking the time to prepare a presentation that’s supported by a package of well thought-out written material will give your business an edge when securing finance.
So, be confident, prepared, and share your enthusiasm about the future of your fashion business with your lender. Your attitude, approach and commitment to the long-term business goals will help establish you as a highly sought-after customer.
Matthew Nolan has 20 years experience in banking and finance and is recognised as one of the 100 most influential people in Australia’s finance industry. He holds two masters degrees and is currently completing his doctorate.