Steps to make banks lend you money now
(MoneyWatch) As you're ending the year and preparing for 2013, now is when you should be evaluating your financial needs. Whether you're looking for funding for the first time, making a presentation to your current bank, or considering a new one, this is the best time to shop the market.
Most companies rarely submit a complete and thorough loan package (or state of the company presentation) for consideration. Typically, a business owner makes a short unrehearsed "speech" to the banker. They submit the required loan application and/or current financial documents that their accountant just finished, which they may or may not have even reviewed or understood for themselves.
Not a good idea.
The three most important things to consider doing at this time are:
1. Get your financial house in order
2. Select the right lending source
3. Prepare the right loan package or presentation
Get your financial house in order
You should organize your financials on a time continuum -- past, present, and future. Through your financial information you will be able to illustrate where you've been, where you're at and where you're going.
The financial section is the most important section of your loan package or end of the year presentation. That's "where the rubber hits the road, the meat in the sandwich, the engine in the car, the wind in your sails." Sadly, however, this is where companies most frequently fail to impress. Even worse, they sabotage their credibility by providing inaccurate, incomplete, unnecessarily unflattering or even baldly false statements and projections.
And what's more, financial underwriters are well-versed at performing "sniff-tests." If there's anything rotten or fishy with your financials, you can believe they will sniff it out -- and throw it out.
Select the right lending source
You probably don't buy clothes without trying them on first. "In banking, as in clothes, fit is everything. Beware of selecting a bank that is unfamiliar with your industry or business model." You want more from a bank than a cookie-cutter approach to lending.
Save your final presentations for the financial institutions you believe to be your best fit(s). This doesn't mean you won't go with one of your earlier presentations. What it means is that as you refine it, you will make changes in the document where appropriate. The 5 P's Rule applies here: Proper preparation prevents poor performance. And you'll be totally on top of your game.
Yes, you can make banks compete to lend you money. The best way to do it? Shop 'til you drop: At least 10 banks that you pre-qualify.
10 reasons to shop 10 banks
1. You receive better pricing.
2. You get better interest rates.
3. You get less restrictive covenants.
4. Your bank fees and charges are minimized.
5. You get to learn how banks work and how bankers think as you go.
6. You get experience with the varied personalities and approaches of bankers.
7. You will create a sense of urgency.
8. You create a buyer's market.
9. You get to do practice runs.
10. Your presentation is refined by the time you get to your ideal banking prospects.
Prepare the right loan package or presentation
A quality presentation will provide you with far more than financing. Think of it as a road map for your company's future.
Your loan proposal, whether for a new or existing loan, can also serve as your strategic plan for 2013, creating vision, clarity and alignment for your objectives and goals. "It can 'sell' and inspire company stakeholders, including bankers, strategic partners, vendors, current and potential advisory board members, employees and recruits."
The right presentation will give you a realistic sense of what your business will require in terms of people, time and money, ultimately allowing you to make better business decisions.
It will clearly outline your company's future plans, current status and history, as well as potential business challenges, opportunities, and tactics. Your presentation should have both substance -- and sizzle.
These three main points are further explained in depth in the book written by Mary Goodman and myself, "Make Banks Compete to Lend You Money," which has been quoted throughout this article. You can go to our website to download these three chapters for free, or you can purchase the entire book on Amazon.com.
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