September 9, 2009, 5:00 am

Looking for Commercial Financing? Prepare Yourself with a Business Plan!

by: The Financial Blogger    Category: Alternative Income
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business-planThe world is filled with opportunities. In fact, the world is also filled with people and great ideas to seize these same opportunities. This is how fortunes have been made through the ages. Unfortunately, the world is also filled with people who seem to do everything possible to slow your progress; we call them commercial bankers 😉 How many times did you hear someone saying: “I had the perfect business idea but that guy with a tie didn’t want to lend me the money. What does he know about my business anyway?”.

This is the classic point of view of many an entrepreneur at the beginning. They are filled with passion, motivation and ideas… but they don’t have a buck to pay for coffee. Based on the fact that 9 of 10 companies close within the first 5 years of their existence, commercial account managers have a tough job; saying “no” to many entrepreneurs… especially when the business owners don’t have any collateral to offer for the loan! Commercial loans are often approved on the long-term viability of the project and the people involved in the startup. If the project is not yet born, your chance of obtaining financing decreases significantly. However, if you show up at the appointment with a business plan, you may convince your bank to give you a chance. Reading a few business plan books wouldn’t hurt ;-).

In the meantime, I have outlined a few indications on where to start a simple plan. These key points need to be answered no matter how big is your company. However, you may want to pursue your research by buying a business plan book.

#1 What is your company

It is important that you explain what you will do with your company and what is its mission. Your business plan should include answers to questions such as: How do you attract clients? Manufacture products? Deliver services? How are you going to make a profit?

#2 Who is the founder?

A crucial point when we lend to a new company is to know the people behind it. What is their experience? Do they know what they are doing? Is he financially solvent? Do they have to quit jobs to start the company? Can they live with a small salary at first?

#3 What is your product / service

This is basically where you explain your business model. Which kind of products/services will you offer and how will it be provided. Will you need suppliers? Will you have to pay them right away or in 30, 60, 90 days? What is your expected profit margin? How do you calculate it?

#4 Who will be your clients

Commercial lending is based on trust. This is why your bank wants to see your business plan and know who has been identified as your clients. If you can define your niche, you will probably be able to target them efficiently and your chances of closing sales are higher. This is why the bank wants to know about your clients. They also want to know if your niche is big enough to support your lifestyle considering a decent closing rate, competition, economic situation, etc. Is the market you are aiming for expanding or shrinking? Business plan books often use the Porter model to define the business environment along with the definition of different markets.

#5 Crucial question: How much do you need, why and can you endorse the loan?

Asking for commercial financing, even after reading business plan books and making your own business plan, is a tough game. You need to be able to demonstrate why you need the money you are requesting and how you can pay it back. This is why, no matter how great your plan is, your bank will most likely request that you guarantee the loan personally and / or provide collateral.

If you are serious about your project and want to learn more about it, I suggest the following books:

image source: Christopher Chan


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[…] some funding (and are planning to use other people’s money) for your business, make sure you have a solid business plan. This article discusses the various key issues when creating a […]

I used to run a new venture consulting business and one of the hardest things was getting financing for clients. Unfortunately, a new business consisting of only a business plan will never get bank financing. If you get it from the bank then it’s probably a personal loan or a mortgage or a credit card secured by, as you said, yourself.

If you are a startup and you need money then the place to get it is investors. Family and friends are good places to start. Sometimes the government will give you various types of grants depending on the business idea.