Banks are still the most important players in start-up financing. Those who need money need to work with them smoothly. n this article we will guide you through how you prepare for a bank funding application and what else you can do afterwards to become your bank’s “favourite business” if possible..
1. How can you prepare for a bank funding application?
In your first bank conversation, you have to be as confident and convincing as possible. Because bank consultants try to deduce from your presentation and their experience whether you are at all suitable for the entrepreneur: Do you radiate the necessary self-confidence and enough bite to meet the challenges of self-employment? Are you trusted to beat you later in negotiations with suppliers or customers?
Not everyone is left to remain calm in stressful situations like this. It’s not bad when you’re showing your excitement during your bank conversation – after all, this is an important appointment for you. But at no point should you feel that you are not up to the task. Confidence does not mean superior or daring, but authentic and positive.
What actually happens in the bank conversation?
Who knows what is to come, can react more calmly. Therefore, when you prepare for a bank funding application you should know how a typical bank call works. It usually consists of these four phases:
1. Warm-up phase
In the warm-up phase, the interlocutors operate loose small talk. A great opportunity to thank you for the invitation and interest in your business plan.
2. Presentation of your business idea
Your company’s vision should be clearly structured and understandable. Explain your project in a maximum of 10 minutes and represent the central cornerstones of your foundation. This is better with graphics. For example, you can print and take with you the diagram of your business idea that you have developed in our business model module.
Don’t forget to name your capital needs in concrete terms (“I need you to get xx dollars in financing”) – because that’s what the conversation is all about!
3. Discussion of the business idea
Open the discussion by asking bank employees for questions and feedback. The key is that you can demonstrate the marketability of your business idea. For this you need a conclusive answer to the question: Why should people buy your offer in the first place and why should you buy it in the first place? Prove facts, what you can prove. Explain how you want to find the answers when you ask questions you can’t answer spontaneously (yes , there will be!).
That doesn’t mean you should text your counterpart. Keep giving them the opportunity to ask about your business idea and respond to their objections.
Bank employees are particularly fond of talking about the number part of your business plan and your assumptions there – so in your world of numbers you should definitely be familiar and have the most important cost blocks and sources of income in mind.
Finally, summarize the outcome of the conversation and the critical points from your point of view. On the one hand, you signal that you have understood your counterpart and take it seriously. On the other hand, it prevents misunderstandings. Ensure that your business plan is improved in the criticized areas and invite you to work together to determine the way forward.
By the way, only rarely does a bank approve a loan after the first conversation and simply wave the business plan through. Think of your consultants’ criticism as an opportunity to refine your business idea and take the next steps with even better preparation.
It is very helpful to practice the bank conversation beforehand, gladly with friends as a sparring partner. The aim is to be able to provide information about your project in a fluent and comprehensible manner. One or two of these trials gives you enormous security – try it out.
You should bring these documents to the bank meeting
- Business plan and annex (even if you have already released these documents to the bank on the founder platform)
- graphical representation of your business idea for your presentation (Business Model Canvas)
- Documents that you can use to prove your collateral and equity (account statements, deposit statements, etc.)
- current tax information (just so that you know what’s in it)
It is not necessary to put all the documents on the table from the outset. However, it does not hurt to be able to bring them out in the ongoing conversation when they ask.
Even a prototype of your offer or a short video can help convince your counterpart of your foundation. It is best to inquire in advance what is desired and usual at your bank. Different bank advisors have different ideas. So find out in advance who you’re talking to and briefly clarify their expectations with this person. This brings you security and looks professional. Also clarify whether your interlocutor mainly supports start-up financing. Depending on the size of an institute and whether it has a business start-up department, this topic is not always dealt with by specialists, but e.g. by branch managers or corporate account managers. If they don’t also have experience in the start-up business, they may look more at your personal economic circumstances (account management, assets and the like) and the general marketability of your idea than the details from the business plan – than it is start-up specialists would be accustomed.
You can do this to make sure you make a good impression
- A well-groomed exterior is the be-all and end-all in the bank conversation. Think a few days in advance about what you want to wear and put your clothes ready. Don’t dress up, an authentic appearance is the best here too.
- Get on your way in time. If you come too late for your bank meeting, you will mess up the decisive first impression. It is best to be so punctual that you can prepare yourself for a moment just before your conversation and go through the most important points of your project.
Take a close look at your business plan several days in advance. It is the basis for the conversation. You should be able to respond to requests on any point without hesitation. You don’t have to memorize everything, but you should already know the most important numbers. Especially if you have questions about your financing, you should prepare well.
2. You will be appreciated at your bank for this
The first bank meeting is crucial. Nevertheless, it is only the beginning of a long-standing and ideally trusting relationship between you and your bank.
Unfortunately, many entrepreneurs have a rather moderate relationship with their contact persons at the bank. They are annoyed by their requests and feel controlled. This is usually because they don’t understand why bankers behave in this way. In order to build a productive relationship with your bank advisor, you should try to put yourself in it and understand his motives.
How does your bank advisor tick?
Of course, when you prepare for a bank funding application, it’s vital to know that not all consultants think and act the same way. One may have a penchant for young startups with innovative business ideas. The other relies on tried and tested. But no matter – in the end, every bank employee has one main goal: to meet the bank’s requirements and to achieve a certain return with the investments at the end of the year. If you don’t repay your loan, your counterpart may miss this goal.
Your adviser will probably need to look after more than 100 or even more than 200 borrowers. Several of them regularly cover their accounts or have repayment problems, the workload increases massively. Imagine borrowing money from 200 founders and keeping track of them – how would you choose? Would you give a loan to many speakers with untested novel ideas or people with chaotic accounting? Or are you on the safe side?
So it’s no wonder that your counterpart wants to know almost everything about your company. If you call because you have withdrawn a larger sum from your business account, it is not harassment, but a justified desire to knock off risks for the bank.
There are also legal reasons why your bank keeps requesting certain documents – it simply has to do so. So try to control your emotions. Rather, make sure that the demands of your bank do you as little work as possible, instead of getting upset and straining your relationship.
What documents does your bank need after financing?
Your job as an entrepreneur is to recognise your bank advisor as a partner right from the start and always provide you with the most important documents – in good times as well as in bad times.
Your bank will appreciate this information:
- quarterly: Business evaluation (often handwritten in a few words)
- event-related and unsolicited: information about key changes in your company or industry
Report calmly about filling an important position, about the difficulties with your supplier, about the successful major order, or about the profound changes your industry is facing. Be sure to prepare your contact person if you can’t service your loan on time. Explain why it is and what measures you will take to solve the problem.
Verdict: You have the same goal
Make it clear that you are pulling together with your bank. Ultimately, you have the same goal: you both want your company to do well and for funding to go up. Because that’s the only way your bank will make money.
Only by giving your financing partner insight into your business development can you benefit from its expertise and resources. And then the chance is greatest that the bank will be firmly by your side even in times of crisis.
We hope this guide helps you to prepare for a bank funding application, and wish you success with your ventures!