Our strategy surgeon Bobby Lane, accountant and small business advisor, answers your questions.
Q: I am looking to set up a new chocolatier business and need to get some additional start-up investment. I’ve used up my initial savings and my close family and friends are not in a position to help out. This means I need to get a Bank loan! However, I’ve read and heard the horror stories about how many start-ups and businesses get turned down. What’s your advice so that I don’t fall at the first hurdle when I meet the bank manager?
Strategy Surgeon says:
Do you have a business plan?
Whilst it may seem obvious to prepare one, many would-be business owners fall at the first hurdle by presenting nothing at the meeting or what can be described as little more than a ‘back of cigarette packet’ plan. If you are serious about your business then you need to show your bank manager that you have put some thought in to how the business will develop and that you have looked at the competition in detail as well as putting together financial forecasts.
How much money do you need?
Don’t say whatever you can give me – I have heard that this has been said to a number of bank managers. If you have done your homework and have drawn up a detailed business plan you will have a reasonable idea of your requirements. It will also help to make you come across as a credible businessman or woman.
What experience do you have in the sector?
If you don’t have all the skills or background, this needn’t be a hurdle. But you should work out what skill gaps you have within the business and whether you will need to recruit a specialist and what this will cost the business.
How are you going to live and what are your personal assets/liabilities?
Remember to prepare a clear breakdown of your personal living costs and what is the minimum wage you will need to draw from the business. Banks will also be more inclined to loan if you have security such as a property. But you will also have to be upfront about any debts or liabilities you currently have and how you will be dealing with these when you start your business.
What type of finance are you looking for?
It is useful to look into the type of finance you need before your meeting. Will an overdraft carry you through or will you require a larger loan or will asset based lending such as factoring work? Don’t worry if you don’t know all the detail as your bank manager will be able to advise you on the best facility for your business in the meeting.