Ideas for Convincing the Bank That Your Idea is Credible
by Startacus Admin
Ideas for Convincing the Bank That Your Idea is Credible
If you'd like to start a business and need the initial funds to get your idea off of the ground, you'll have to be persuasive. Convincing a bank that your business idea is credible is quite the challenge. Let's take a look at some tips to make it happen.
Show How You'll Use The Money
Bank lenders will be more receptive to your business idea if you explain to them how you'll use the funds to grow you business. Be specific when you offer your explanation of how the money will be spent. This means that you'll have to develop a spending plan even before you request the money. Show them exactly why the money is necessary and what it will be spent on, whether it is marketing, product development, overhead expenses or something else. Leave nothing to doubt here, otherwise you’ll get nowhere fast.
Illustrate The Demand For Your Service Or Product
If you can show that there is significant demand for your product or service, you will be much more likely to be approved for a loan. Do your research and cite credible sources that show a current and future demand for what you plan on selling. Use statistics – from census reports, economic reports, the Internet, and relevant news articles. Nobody is going to be interested in financing an idea that isn't in demand, not even the most speculative of VC investors. Show exactly how your business will serve a critical need and you'll up your chances for approval.
Don't Ask For More Than You Need
It can be tempting to think big, but it would be a mistake to shoot for the moon. While you might have grandiose plans to build a business empire, don't ask for all of the capital that you think you'll need for the next five years. Ask for a modest amount of money that will help to get your business idea off of the ground. Lenders will not be keen on funding all of your future resource requirements right after the first presentation. You need to ask yourself “What is the minimum amount of resources that my project needs at this moment in order to reach the next level?”
Provide Collateral
If you have been in business for a few years, you'll likely have enough stability and assets to serve as collateral. Most banks will loan money to small businesses that already have significant inventory and revenue. They'll also be more inclined to loan money to a business owner who has personal collateral such as a home. Another option would be to apply for a personal loan that comes with a low interest rate of 4.9% from Clydesdale Bank. You even have a choice to repay the loan within 1-5 year period.
Show How The Business Will Earn A Profit
Perhaps the best way to secure bank financing for your business is to prove to the lender that your business idea has the potential to turn a profit. Test your idea out in the marketplace through what is commonly referred to as a “working model”. This way you'll have some hard data to present to the bank when you apply for a loan. If it’s not possible to test your product/service on a small scale, you’ll have to do some research to come up with numbers from similar businesses that are already successful in the market you’re entering.
Follow Up After Your Presentation
Reach out to the bank representatives who spent their time listening to your presentation. Even if they deny your initial request, you might get the green light in the future after after another presentation. Start building up your good will with the bank right away.
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Published on: 4th September 2014
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