The ultimate "must-have"
What is it? Money. Plain but very chic in the current environment, where securing a loan has become harder than securing a Birkin bag. Finance expert Matthew Nolan tells how to get your fashion business the credit it deserves.
Many fashion business owners have been frustrated at some point by a bank declining their loan application. The chances of being turned down now are even higher, as banks have reduced their business lending and tightening approval criteria, in light of the “credit crunch” and expectations of a downturn in the economy.
This means proper preparation for a loan application has never been more important. Remember that your bank manager wants to approve your business, as they have sales targets and dream of a bonus like most salespeople. But they need your help to instil confidence at the bank that your business can and will repay the loan, especially to bank staff who won’t have the opportunity to meet you firsthand.
With the appropriate research, face-to-face presentation and package of information, a loan approval is well within the grasp of most businesses, including some that may have been previously declined.
Before you start
It’s important to seek the right advice on suitable finance facilities for your business, as there’s a growing array of options available. Speak with experienced advisors such as your accountant or finance broker and a range of traditional banks and alternative lenders.
The pitch
Once potential finance products and lenders are selected, the next step is a series of face to face meetings with potential lenders that should be booked at least a few days in advance. Your personal presentation is important, so wear business attire and be punctual for your appointment to illustrate that you’re well organised.
Preparation is the key to a successful meeting and it will also boost your confidence. Be ready to discuss your business, its history, industry, financial information and future plans.
During this meeting it’s important to demonstrate a comprehensive knowledge of your business and industry, whilst being realistic. This gives comfort that your business is a low risk and should be lent money.
Following your earlier research, also share with them your thoughts on how much funding the business needs and how this will be used and repaid, including the additional revenue that the loan will generate.
Follow-up phone calls to ask further questions are common and present a great opportunity to reinforce their impression of you as a competent business manager, by giving prompt and accurate answers - whilst being polite and professional.
The package
The meetings with potential lenders are important, but the package of written material you provide to them is even more vital, as it will be their principal source for information when assessing your application.
A well prepared and neatly presented package of information should include the following items:
Financial information – Lenders rely heavily on financial information, so essential inclusions are the profit & loss and balance sheet statements for your business. Don’t forget to include interim financials if these are more than a few months old.
If you can include an aged listing for both debtors and creditors it will enable potential lenders to see that your business is vigilant in following up customers for payment and that it pays its accounts when due. A cashflow forecast is another useful inclusion, as it shows how the loan will be afforded and helps alleviate any concerns of a working capital shortfall in the business.
An asset and liability statement for each relevant director or shareholder should also be included, with individual statements outlining details of all assets and liabilities held in their personal names. All this financial information needs to be correct, with suitable explanations for any extraordinary items or significant variations.
Business Plan - Forget the lengthy business plans of old that were laboured over for days and then read by no one. Today’s lenders need a short but information packed business plan that clearly conveys the key aspects of your business and future plans, including an overview of your business, details of it’s management, large customers and suppliers and business goals. Don’t forget to also briefly outline key risks and how these have been mitigated, minimised or managed.
Supporting information - Be sure to include items such as brochures, newspaper & magazine articles, copies of ads, client testimonials, references and other promotional material. These boost your business’ profile and highlight its professionalism and approach to business development.
Red carpet, not red tape
To enjoy benefits when borrowing that include cheaper pricing, quicker loan approval and perhaps most importantly – understanding and flexibility if there’s difficulty repaying the loan, it’s paramount to have a good person to person relationship with your lending manager.
To enjoy these benefits make sure you find a local lending manager that can meet with you in person and visit your premises. Ideally they should be interested in your business and have some understanding of your industry.
So, be prepared and confident when seeking a loan and remember to share your vision and enthusiasm about your business!
Matthew Nolan is the host of SME Money Makers on Sky Business and has over 19 years experience in banking and finance, specialising in providing finance to SMEs.