Getting capital from banks

Imagine this…
A stranger man knocks on your door and you answer. He introduces himself and he asks to speak with your father. You invite him into your father’s study where he sat till your father joined him. After a little while, your father invites you to join in the meeting. A cursory look at him shows he’s a perfect gentleman. He is neatly dressed, with a good haircut. His English is impeccable and his manners are flawless. However, these features are not a fascinating as the business idea he’s discussing with your father. He ends his speech with a request for a loan to execute this idea.

Your father had a thoughtful look on his face as he asked the man to gentleman to excuse you. He wanted to talk with you alone. While the man sat in the waiting room down the hall, your father turns to you and asks thoughtfully, “Do you know this man?” You said, “No, I thought you knew him.” “I have seen him a few times at the bar, walking along the street, sometimes at the church but I didn’t know his name until today.” He continued, “I don’t have any money of my own, the only money I have is the one my friend kept with me for safe keeping. Should I borrow him?”

What would be your advice?
If my guess is right, as a wise counsel to the father you won’t tell him to lend money to a complete stranger. That would be because you don’t know him even thought he has what seems like a lucrative idea.

The above story is the story of many entrepreneurs who go to banks when they have an idea. The only twist is that it is told from the bank manager’s son’s perspective. The reason bank managers don’t lend money to many young entrepreneurs is that they don’t know them. Now, if your idea was good enough he may have lent you some of his own money but who would take the risk with another person’s money.

Getting money from banks
Start with a savings account – a habit of savings is crucial. It is not common practice in the developing countries so it is easily noticed. Ensure it is regular and consistent no matter how small. Leading banks monitor trends of their customers – they discuss them. If they know you save regularly they is greater trust that you will bring the payment installments regularly.

Have a relationship with the bank and the manager. If you have started something, talk to the bank manager about it. If possible, invite him to your factory; and let him take a walk through. Ask for his recommendations for professionals who can assist you with your business development.

Develop an accounting system that is consistent with the level of your business. It is crucial that records are kept of financial transactions, record in a logical sequence and summarized neatly so that it can be interpreted intelligently. Many small businesses that has handled millions, need a few thousands to buffer an enlargement, but they don’t get it because proper records of past feats were not kept.

Understand their language. The banking world has its lingo. Learn it, use it.
This principle that applies to both investors, venture capitalist and money lenders is that they are not as concerned with how you want to spend the money you want to collect but how you are going to make the money (and pay them), the period within which this will occur and the probability that it will be paid per schedule.

Presently, the banks have much cash to give out. Government regulations support such too. However, the will give only to those they can trust. See to be that person – they will run after you with their funds. All the best!