Be Your Own Boss

But just how do you go about “shopping” for a banker? Well,
the best way to do so is by asking other entrepreneurs to
tell you who helped them get started. Every business has to
begin somewhere, and chances are you’ll find out about
ventures that began with the help of a local banker. Banks
tend to specialize in their dealings, too, and your
questions should soon lead you to someone who likes to
cater to the needs of small business folk.

However, after you locate a banker–even if he or she
is experienced with and sympathetic to the needs of home
businesses, and has a track record of lending money to such
ventures–your loan will depend upon your ability to
present that man or woman (who, thanks to your shopping,
will at least be willing to listen) with a reasonable
proposal. Now, the factor determining the success or
failure of such a proposition is frequently not so much its
specific content as it is the manner in which it’s
presented.

I called the president of a local (Connecticut) lending
institution–the fellow’s name is Jim Banks …
he’s one of those “good” lenders and often goes out of his
way to help small businesses–to ask him what he looks
for in a loan seeker.

“The most important thing is evidence that the applicant
has thought the business out,” Jim told me. “I want to see
that his or her plans are realistic and somewhat detailed.
The loan-seeker should present a monthly cash flow
projection, a business plan, a personal resume, and a
personal balance sheet.” 

Here’s How It’s Done

As Jim says, a monthly cash flow projection is one of the
basic “tools” of the finance-seeking businessperson. The
document shows the banker that you’ve put some thought into
your business idea. (The example that accompanies this
article has been kept simple enough to be applicable to
almost any business.)

Now when you present your projection to the banker, you
won’t have the $2,000–or whatever figure fits your
needs–in starting cash shown at the top of the list
(this is the money you’re there to borrow … it’s called
“working capital”, or the amount that’s on hand to pay
bills before your business starts bringing in cash). You
simply have to be able to show him or her that a loan of
$2,000 would give you the necessary working capital. You
should also be able to show–with your cash flow
figures–that your income will be great enough to pay
off the loan within a specific period of time.

The business plan is a description of your market (telling
which people, where, will buy from you … and why), your
services or products, your means of attracting customers,
and your plans for managing the business. The more detailed
this summary is, the better your chances of obtaining a
loan will be … the plan ought to easily fill up a
couple of typed, double-spaced pages.

Most folks think of the personal resume as being useful
only when looking for a job. But the relationship between
employer and employee has a lot in common with that between
banker and businessman -or woman. The person lending you
money will want to know just who it is that he or she is
dealing with!

The most important factor in preparing your personal balance sheet (which will list what you own and
what you owe) is accuracy. Don’t overlook assets such as
autos, furnishings, etc.–most folks are “worth” more
than they think–but don’t try to inflate your wealth,
either. The worst thing you can do when seeking a loan is
to appear unrealistic in your approach to money. If your
balance sheet shows you to be nearly broke, the fact that
you’re willing to face up to the unfortunate state of
affairs may have greater influence on the banker than does
the size of your bank account!

This last point leads me to the most important ingredient
in all segments of your presentation: HONESTY. Don’t
try to look better off than you are … don’t hide
business failures in your background … don’t
overstate your financial projections … and don’t
ask for more money than you need, thinking the banker will
reduce the amount automatically.

In conclusion, always remember–when trying to secure
a loan–that you’ll be dealing with a reasonable human
being who, at the outset, is probably every bit as
interested in saying “yes” as in saying “no.” If you’ve
prepared your “case” well (and if you present it
with a positive attitude and genuine, but controlled,
enthusiasm), the odds are that you will find a banker who’s
willing to join you in your exciting vision of the future.
Good hunting!

A Sample Four-Month Cash Flow Projection

Months                 1st     2nd     3rd     4th

Starting cash       $2,000      --      --      --
Cash from sales       $650  $2,000  $3,000  $3,000
                    ------------------------------
Total cash          $2,650  $2,000  $3,000  $3,000

Payments:
Inventory  
 & supplies         $1,000    $500  $1,450  $1,600
Advertising            250     250     250     250
Note 
 (principle 
 & interest)           150     150     150     150
Rent                   300     300     300     300
Insurance               50      50      50      50
Salary                 750     750     750     750
                      ----------------------------
Total payments      $2,500  $2,000  $2,950  $3,100

Net Gain (Loss)       $150      $0      $0    $100