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Selling Yourself & Your Ideas to Banks - Part 1

Guest post by: Barbara Garro

Article Overview: Your loan and line of credit are important to the viability of your business. Do it right and you get what you want, provided the non-negotiable basics are in place. Part 2 will give you the in's and out's of a Successful Loan Presentation by Somers White.

Selling Yourself & Your Ideas to Banks - Part 1

If you need capital right now, you have two things going for you. Banks have plenty of money to lend and they want to lend it. And, here you have a panel of three professionals who can guide you to bank loan success. Roger Dawson, negotiation author/speaker, Patrick H. O'Leary, enneagram author/speaker of O'Leary & Associates, Somers White, bank loan consultant, at one time the youngest bank president in "America, and founder of Somers White Company.

Between you and your loan is a challenge. Can you give a bank comfortable assurance you can make loan payments on time and in full?

THE NEGOTIATING POINTERS - Roger Dawson suggest you go in for a loan projecting the image of a borrower with alternatives. "You don't want to be perceived as a beggar at the bank. If you go into a bank and that is all you are going to do, the loan officer can sense you have no alternatives."

You can create power in what Dawson calls "servicing the perception that you have options. "Options give you power in negotiations. You are going to project power either because you really do have options or they think you do." Remember to do your homework so you negotiate with the person who is able to make the decision. Dawson says, start at the top and work you way down. Call the president and say something like, "I have been a customer of the bank for eight years and I would like to discuss my capital needs with you." While the president may not personally negotiate your loan, you want to go down the chain of command rather than up.

Ask for more than you expect to get, for $100,000 if you want $50,000. There are sound reasons for this. A credit line of $100,000 is there for you to draw on. That is good business because your chances of under-estimating your needs are high. When you have more than you need, you can use the loan to make payments in a cash shortfall. It is disastrous to make a loan and not be able to make a payment.

Just when you expect your answer, the loan officer may tell you your application needs loan committee approval. They do this because they don't want to be in a position where you can push their decision.

Here's what Dawson says you can do--

1. Appeal to the person's ego. Say, "The committee always follows your recommendation, don't they?"
2. Get the loan officer to commit that they will recommend your loan to the committee.
3. Leave with an assumptive close. "Can I assume this will be approved as long as my current credit record and other paperwork is acceptable?"

Patrick H. O'Leary adds an attitude twist, "Negotiation is a real art form. When you go to get a loan from a bank, you should never presume that a bank has something to give you. You should presume that you have something the bank wants. The bank is going to take your money and do something with it. You have the best possible money the bank could ever get. Now what are they going to give you for it? What kind of favorable terms can you get the bank to give you?"

THE BANK EXPERIENCE--Here are the basic mechanics of a business loan from a bank's point of view. As an entrepreneur, I like the user-friendly appeal of a small bank. A small community bank, and remember credit unions in the small institution mix, is willing to do a significant amount of hand-holding for a new loan prospect. That means if you come in with an idea and have at least the minimal amount of assets compared to loan amount, the bank will describe the process to make the loan acceptable to the bank.

Typically, for new businesses, potential borrowers should put together a business plan, and the bank may be able to help with sample, general business plans that will allow them to think through the process of starting the business. In addition, the bank will ask for a personal financial statement and tax returns for the most current two years. The reason for this is to give the bank some ideas of what the prospective borrower can earn in outside employment should the business fail. Consider someone walking into a bank with little in assets. The bank will not be willing to act like a venture capitalist in such a high risk venture.

For existing businesses, banks typically require three years of business tax returns and/or financial statements, which include at least balance sheets and income statements. Forget the myth that "banks only lend money to people who don't need it." Understand that both the bank and the loan applicant have something at stake and both must be committed to making the loan work. Loans are business partnerships.

Always your loan will go through the loan committee for an analysis process. There are no lone ranger bankers, so avoid pressuring the loan officer you are speaking with. Remember, sometimes, the bank will suggest someone who can help even if it cannot provide the loan. Help can mean economic development organizations who can serve as lenders of last resort.

Part 2 will give you the the in's and out's of your Successful Loan Presentation.

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Article Tags: bank loans, credit application, loan application success, negotiating with banks



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