“I'm a great believer in luck and I find the harder I work, the more I have of it," said Thomas Jefferson of his successes. In addition to writing the Declaration of Independence and serving as the third President of the United States, Jefferson was an architect, scientist, inventor, philosopher and farmer.
For those seeking business financing, preparation and hard work are essential. Loan officers rigorously measure loan applicants’ proposed projects for risk and scrutinize the market, company operations, industrial sector, management, manufacturing processes, financial performance (historical, current and projected) and the personal financial history of the owner(s).
Lenders compare and model the company’s financial performance and project numbers to similar local and national companies using numeric ratios. They will often ask numerous questions to gain understanding of the project, and to gauge your understanding of the details. Lenders expect to be repaid. Unknown and excessive risk is anathema to them.
Successful established clients have a bit of an easier time for routine requests, because much of their company data is already on file at the bank. However, the data is reviewed.
Lenders want to make loans - that’s how they earn income. But, they will not, and by regulation cannot, make loans without detailed data—the kind of data that is contained in a business plan. Your great idea is simply not enough.
The best way to prepare for and finance a new business venture, whether for an established or a new business, is to research and write a business plan. A solid business plan includes the following information:
- Executive Summary
- General Company Description
- Products and Services
- Marketing Plan
- Operational Plan
- Management and Organization
- Personal Financial Statement
- Financial History and Analysis (for established companies)
- Project or Startup Expenses and Capitalization
- Financial Plan
In summary, financing can be difficult to acquire. Without a solid plan and lots of preparation, it is impossible. Relentlessly plan and prepare for success so that good luck can find you!