Pitching your startup idea to a bank manager may seem like a daunting task, but you don’t have to be a sales expert to walk away with the funds to launch.
First impressions count, and it’s essential to know the ins and outs of your business, from financial forecasts to what differentiates you from your competitors.
Before meeting with the bank, startups should familiarise themselves with the formal loan application process, Rob McGuinnes, partner in business advisory and consultancy at Nexia Australia says.
This includes preparing a professionally worded business plan for your bank manager and being aware of what questions they are likely to ask.
Loandesk co-founder and director Leigh Dunsford recommends getting the manager’s business card and emailing them a very brief outline of what you will be discussing in the meeting.
“Make sure it’s short and to the point, waffling on will give the manager the sense that you’re inexperienced,” he says.
Similar to a job interview, you also need to present yourself well. You need to walk into your appointment well dressed, looking professional and demonstrate you are serious about business. Go prepared with your business plan and financial forecasts.
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Although it may seem like commonsense, you need to be clear on the amount of the loan you require, and explain to the bank manager the reason for obtaining the loan, McGuinness says.
“Be sure to justify these reasons and provide a clear repayment timetable as this demonstrates commitment to and understanding of the loans process,” he says.
Startups need to be able to illustrate they understand where their business is heading financially, says BusinessNAV executive director Ben Farrands.
“This is best displayed with a cash flow and budget forecast, ensuring your assumptions for growth are realistic and detailed,” he says.
“A clearly worded business plan and an ability to demonstrate the quality of your service or product and what differentiates you from the market could convince a traditional lender you’re a worthwhile risk.”
Startups should also consider getting their business plan and financial forecasts looked over by an expert before they approach a lender. This could be an accountant to ensure the numbers are spot on, or an experienced entrepreneur to ensure your pitch is right.
Banks are risk averse organisations and therefore the bank manager will need to know that the chances of you not repaying the loan are very low, says LegalVision chief executive officer Lachlan McKnight.
“If you’re launching a company, this usually means providing security over collateral which has a similar or higher valuation to the amount being borrowed,” he says.
Security may include equity from your property or investing some of your own money into your business venture.
Dunsford says being willing to negotiate this way shows how committed you are to your plan.
“If you don’t want to offer it [collateral] up as security, the banks will question why you’re not willing to put some skin in the game but expect the bank to take the risk,” he says. “Banks don’t ever want to take your collateral when you default on a loan, but it makes sense that they don’t want to be left out in the cold if you decide it’s time to walk away.”
Not all startups are successful when pitching their business idea to a bank manager the first time, but it’s evident that you can increase your chances by being prepared. It’s important to not only know your businesses strengths, but also its weaknesses, and to be honest. Constructing a well thought out and professional business plan with spot on financials will show the lender you are serious.
Lastly, and most importantly, practice your pitch and sell your dream!
Written by: Nicola Trotman
This article is sponsored by Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ).
Success starts here
If you’re thinking of starting a small business, or have recently launched one, you want to do everything you can to ensure its success. Visit the $2 Billion Lending Pledge to find your local ANZ Small Business Specialist and get an indication of how much you could borrow.