Nowadays,
getting a loan for a start-up is a challenging task. Here are five
reasons you will not walk out of the bank with a business loan:
1/
The bank is not in the lending mood.
Banks might (temporarily)
decide not to back starting businesses for reasons of risk
management. The bank doesn't know you. You are a beginner without a
track record, so the risk for a lender is elevated.
2/ Your
business is weak.
You present yourself to a branch
representative and make your case. Consequently, your written
business and financial plan are passed on to the back-office. Those
guys did not see your sales pitch in person. They only have your
documents to go on: lousy plan, no loan.
3/ Your project is fragile.
Your business plan is good, but the bank judges that your project
has few potential and that the numbers do not add up. Usually, a
financial plan makes some assumptions, and maybe the bank does not
follow yours. Or they consider your premises to be too optimistic.
4/Too few earnings.
Money talks. Your business plan is good,
but the bank thinks that the investment and the risk are too high in proportion to the earnings.
5/ Too
smart.
Highly innovating and technological projects are
challenging too fund. The bank has no feedback or numbers on similar
innovations and projects, and that is why even fantastic business
ideas are unable to get funding.
I could have written an
article with 27 reasons why banks turn down start-up loans. But, to
simplify the matter, all reasons boil down to one fundamental
question: how likely is the bank going to see back its money with
interest.
Here is what I want you to do.
Read your business
plan out loud in front of a mirror.
Put yourself in the shoes of
the banker.
Would you loan money to the guy in the mirror?
I
hope you would!
Top
10 about the author; Erik Victor
1.
is a serial entrepreneur and started his career in Engineering
2.
currently a majority shareholder in corporations in the fields of
Industrial Real Estate, Wealth Management & Investment funds, and
International Tax Planning
3. has a passion for the dynamics of
young businesses and actively endorses several start-ups
4. is an
engaged member of several think-tanks and an international conference
speaker
5. has a business footprint in six countries
6. speaks
five languages
7. personal life - resides in Europe
8. Erik
(48) is known as a discrete and private person, a family man
9.
loves to spend his limited holidays in the mountains or at sea on his
yacht
10. Erik has no social media accounts
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