By Betsi Bixby
With so many lenders exiting the market over recent years, and our own industry media splashing out news of bankruptcies, most marketers will need to get more aggressive when pursing new money. Most traditional bank lenders have plenty of money to lend, but getting them to “yes” requires planning, preparation, and execution.
Planning – Begin by knowing precisely how much money you want, for what, and under what terms and conditions. Today’s tightened lending climate means you must show a good reason for wanting money. With escalating fuel prices, and a simple worksheet, it’s easy to show a banker why your working capital line needs to be raised, but do your worksheet in advance of your request so that you’ll know exactly how much you will need if prices continue to escalate.
Preparation – In today’s lending environment, it’s wise to prepare a formal loan proposal. This proposal should contain all the information a reasonable banker will need to make a loan decision. Start with each loan that is needed, term requested (5 years, 10 years, etc.), the purpose of those funds, and then at least three different ways you could repay each of the loans. (Yes, three! Bankers love to see multiple ways of repayment!)
Next, provide company financial information. It’s a good idea to include three years PLUS a narrative that explains trends in those financial statements. Highlight your good points, and find ways to make your banker feel better about any weaknesses.
Next comes project information. If your loan need is for a specific project, give the bank as much detail as you can about the project, how it will benefit your company, including projections of income and expenses. If a new project, it’s ideal if you can show the bank you can repay the funds even if the project doesn’t pan out as you expected. (Remember that bankers are paid good money to think about all the really bad stuff that could happen to you and your project!) It’s good to show your banker you have thought through the risks and have alternative game plans.
After your proposal is complete, give it to a non-involved third party, such as an outside board member for review. Most marketers leave out critical data by oversight.
Execution – When you are satisfied with your loan package, call each institution and ask to personally deliver and explain your request. Make sure your appointment is with the correct person who has the authority to approve your loan! You don’t want to spend an hour explaining your project needs to the wrong guy. Most bankers, when asked, will be very open and honest about their credit process. Be sure you understand if it’s a one-up, or committee type process, or whatever.
Finally, don’t be in a rush. The old adage about “the only people bankers lend money to are those that don’t need it” still applies! The less needy you appear, the better. If you do your planning, preparation, and execution, you will likely find some very favorable rates still available from most traditional banks.