Raising Capital

Whether you're the owner of a start-up technology company or the CFO of a Fortune 500 firm, the process of obtaining a business loan is much the same. Here's a process for obtaining the loan you want:

Get your personal finances in the best shape that you can.

Find out which banks in your community handle your industry best. If possible, find out what their preferred loan types are and their general lending policies and practices.

Set up a meeting with the bank(s) to discuss your business needs, such as deposits, payroll, payables, and financing. Confirm your understanding of their lending practices and get their commitment to consider a secured loan for your company if you give them your deposits and other business. Unless you or your company has millions in net worth, don't waste your time on trying to get unsecured debt.

Choose the bank (and banker) that you would prefer to deal with for a long time but don't burn your bridges with your other contacts! You will want to keep them interested as well for later competition. Put a tickler on your calendar to go to lunch again with them in the next six to nine months.

Set up your checking, payroll, and payables accounts with your new bank. Be sure everything is running smoothly for a couple of months. Be sure your accounting system can stand up to outside review by the bank!

Prepare your bank-oriented business plan and meet with your banker to verbally request the type of credit that you want (and that fits their practices). A bank-oriented business plan is light on marketing text and technical data and heavy on financial data especially projected cash flows and details on your assets. Include current and accurate financial statements hot off your accounting system. Remember: the scariest thing to a banker is that you will grow too fast for your capital base slow and steady is good to a banker! Have a savvy friend review your package before you sit down with your banker.

Do not expect him to jump on your deal. He will need to dig into certain areas, go to his "committee", and kick your tires. Invite him to see your operations and meet your accountant and attorney.

Sign your loan agreement. With a bit of luck, you'll negotiate and sign your deal within 4 to 8 weeks.

Most businesses have been turned down more than once or twice for loans. If you're turned down for a loan, figure out exactly why don't be shy about asking your loan representative to detail the exact reasons why your business was not a suitable candidate for the requested loan. Then take the time to plan and implement changes to your business that will make it more attractive to lenders. This may mean doing anything from decreasing long-term debt to improving profitability to simply being in business for another year or two.