Getting Your First Business Loan
From the Archives: I wrote this back in 2014(!) when I was a Partner with Murphy Business Atlantic. I was a little green behind the ears at the time. But I wrote this from my experience, and the information is surprisingly sound today.
I was reading an article about getting a business loan, and it reminded me of my first time asking for financing. I remember meeting with my Account Manager (shout out to Paul Ryan!) for the first time. I handed him a heavy, bound copy of my business plan that took hours to write. I remember sitting there and wondering if I had done enough, if I had answered every question, and how he would try to poke holes in every idea I had. His response?
“Holy sh@t! You actually wrote a business plan.”
Speaking with my banking friends, you wouldn’t believe the number of people who walk in with some half-baked financials and ask for money. Well guess what? That’s not enough! If you’re going to ask for money, go in there and show them you mean business. If you aren’t willing to put at least 40 hours into researching, writing, and packaging your plan – why should they give you money? Show them that you’re serious.
So where should you start? First of all, if you are going to ask for money, you need a business plan – no excuses. It needs to be complete, thorough, and have an effective executive summary. Luckily, there are plenty of free templates available online. I can send you my favourites if you ask.
Most bankers will make their decision within minutes of looking at your plan. The packaging and executive summary can make or break you. First impressions matter. Ultimately, they will read the rest of your plan, but only after they’ve already decided whether they think you’re worth investing in.
Accompanying your business plan, you need to have detailed and reasonable financials. This includes three years of income statements AND cash flow statements. Monthly numbers should be provided for year 1. Years 2 and 3 can be quarterly or annually. Know these numbers inside out. If they ask you a question about them, you should know the answer. This doesn’t mean that your numbers have to be perfect – after all, financial projections are more of an art than a science. It does mean that you should have a logical answer for why you used the numbers that you did. And provide supporting documents if you can. Reports, quotes and contracts are great ways to add credibility.
And remember, all of these documents are just one piece of the puzzle. Ultimately, your banker will be investing in you. If they believe you will do everything possible to make sure that they get their money back, they will be much more willing to take a risk. So do the little things, and make a great first impression. Dress professionally, show up on time, and speak with confidence. Show them that you know your business, that you’re passionate, and that you’re committed to making it succeed.
Oh, and you will need to sign a personal guarantee – there’s no way around this, especially for a startup business. Startup loans are inherently risky, and banks want to know that when times get tough, you’re not going to take off and leave them hanging. Banks want to see skin in the game. Without it, you don’t deserve to get a loan.
And remember, if you’re not sure of something, or if you know you’re weak in an area, ask for help. No one knows everything. And no one expects you to. But you do need to know how to use the resources around you to get the job done. You will need to do this every day to succeed at your business, so you might as well get started now. You may not get a yes right away, but don’t give up – keep asking. Do this, and you will find someone willing to give you the money you need.
Disclaimer: I am (thankfully) not a lawyer, nor am I an accountant. If any of this sounds like legal/financial advice, it's not. Take everything I say with a grain of salt. But not too much - I hear it's bad for your blood pressure.
