Successful Borrowing

Introduction

At one time or another, most businesses need to approach lenders for financing. And all lenders have certain expectations. The closer you meet those expectations, the better your chances for success.

Before you approach a commercial bank, government agency or credit union, be prepared to persuade the lending officer that you represent a reasonable risk. Have the following information available:

Business Plan

A business plan should include:

  • An industry overview of trends and estimated sales in the sector. Describe your company’s place within the industry, the competition you face, and how you plan to meet it.
  • An operating plan that outlines your location, facilities, equipment, current staffing, required staffing needs, current inventory and what you need.
  • A market evaluation that assesses the extent of demand for your product or service – and how you plan to meet it. Outline your strategies for sales, pricing, advertising and promotion.
  • Management structure , including your legal, internal and external management resources and personnel needs.
  • A financial plan that elaborates on your borrowing needs. Include your financial status and list your personal assets and liabilities.

For a detailed review in preparing a business plan, consult with your Chartered Accountant. Additional information is available by researching the Atlantic Canada Opportunities Agency Website.

Cash Flow Projections

Cash flow projections that indicate how you will be able to repay the loan. Cash flow is a major tool that lenders use to assess risk and is likely to be one of the first questions they ask.

Income Tax Returns

Income tax returns. These may or may not be required, but they do provide a good idea of how your business is doing.

It isn’t necessary to bring a credit rating report, because it’s easy for the lender to check. However, be sure you have established a rating. Your repayment history will be used to assess your risk.

Meeting

The lender may not take a through look at these documents while you are there, but you generally will have to answer these key questions during the interview:

How will you use the money? Be completely familiar with the details of your business plan and indicate the relevant information that shows how much you need, why you need it, and how you will spend it.

How do you evaluate risk potential? Explain how much you are personally willing to invest in the business or expansion. And describe the collateral that can be used to secure the loan. These assets include equipment, property and automobiles.

What experience do you have? Be prepared to answer questions about your background.

Alternative Sources

Here are some alternative sources to various federal and provincial loans, as well as other financing alternatives:

  • Canada Small Business Financing Program
  • Business Development Program
  • Canada Business Service Centers
  • The Business Development Bank of Canada

Conclusion

Joe has assisted his clients in obtaining new or additional financing for over 30 years. If you wish to engage Joe’s services to assist your company in obtaining new or additional financing, please do not hesitate in contacting Joseph A. Truscott, Chartered Accountant at 905-528-0234 ext: 224, or email Joe at joetruscott@josephtruscott.com.

November 2012