Home' Trinidad and Tobago Guardian : July 9th 2015 Contents to explain them and every line item, particularly
in your projections must be justified.
What is our recourse if (when)
something goes wrong?
All the questions above lead up to this. You
may have wowed the banker with your skill
and experience, your sizeable capital injection,
impressive market research and some realistic
cash flows but if your business model does
not provide for the means to assure sufficient
assets to pay off the loan balance in the event
of default, this will still be a failed applica-
Collateral lessens the risk that the bank will
be out-of-pocket should things go awry if
your widget gets recalled or your event man-
agement firm buckles under the competition.
Therefore, you re not just selling the value
and marketability of your business, but you
must show the value and marketability of your
Be prepared to offer several ways in which
the bank can be repaid should the worst hap-
pen. It is your job as business owner to focus
on the positives but it is the job of the loans
officer to prepare in the event of your failure.
Don t be insulted.
Work with them to allay their fears and in
so doing prove to them that they ve latched
on to a good risk.
The difficulty many business owners face
in meeting this collateral requirement is well-
documented and should it prove to be a deal-
breaker between you and your loans officer,
you could approach lending institutions which
focus on small business loans and are more
willing to rely on cash flows as sufficient cover.
To approve you is the bank's
Remember that banks are in the business
of lending money and your loans officer would
normally rather accept than reject. Bolstered
by the knowledge that you will be presenting
to an audience pre-disposed to assist you, it
is clearly a wasted opportunity to enter that
Too many prospective borrowers approach
lending institutions for financing without hav-
ing taken the time to prepare clear, concise
and organised documentation. You can set
yourself apart from the outset just by going
into your initial meeting with a written sum-
Improve on your positive first impression
by quickly responding to any questions asked
with documented information. This will not
only satisfy specific concerns but act as rein-
forcements to your aura of professionalism
and define you as that ideal applicant.
JULY 9 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG17
T&T Chamber of
Industry and Commerce
For those wishing to access a
small business loan, your first
point of contact with a lending
institution is likely to be the
loans officer whose job it is to
assess your application and
finesse it for approval. Where the bank s busi-
ness mantra is to err on the side of caution,
you must sell yourself as an ideal applicant;
that prospective client whose loan proposal
anticipates every question, satisfies every
concern and makes it easier to present a solid
application for approval. So, what are these
questions and concerns?
What is your business?
You may have just patented the world s
best widget but if your loans officer needs
to read your proposal with a science tome in
hand, you ve presented a failed application.
By the same token, you may be looking to
expand your event management business but
if you ve only provided the loans officer with
enough information to fill a thimble under
the assumption that the nature of your busi-
ness is well-known, you ve also presented a
failed application. Be explicit as to your busi-
ness model so as to decrease the chances of
being rejected out of hand by a loans officer
who found too many gaps in your submission.
Who are you?
For many small businesses, the owner is
the chief cook and bottle-washer. This turns
the application process into a personal one
where your individual value is weighed. The
bank looks to your personal credit, your skills
and experience, and the intangibles of your
demeanour and self-presentation.
Should this be your situation, ensure that
your financial records are in order as your
business will not be viewed on its own but
as an extension of you. Consider this more
personal slant to your company application
in a positive light and don t underestimate
the contagious power of your own enthusi-
Regardless of any perceived weaknesses
(for example, you may have 15 years experience
in insurance but you re now about to enter
into a new field and open up a hair salon),
a loan proposal always looks and sounds better
when presented in a confident and enthu-
siastic tone. Your positive demeanour should
be present in all written and oral correspon-
dence, even if in reality they re your last hope
and the application process has been chal-
lenging to you.
How much money do you need and
what are you going to do with it?
Whatever the requested dollar amount, it
is certain that the bank will not progress your
application unless their loan will join the per-
sonal funds you have already invested or are
soon to invest in your business.
Capital injections tell the bank that you
are willing to stand behind the enthusiasm
you ve projected, the profits you ve estimated
and the business model you ve said will sur-
pass all competition.
The bank should not have to demand this
capital injection of you. A loan applicant
should recognise this as a requirement to
evaluating a proposal as "good risk."
After you ve presented a desired loan
amount, you should now be able to account
for the proposed usage of every dollar. If you
cannot, the answer to whether your business
is worth the risk comes closer to a "no." The
inability to properly respond to this most
basic of questions---how will you use our
funds?---reflects poorly on your organisational
skills and shows a lack of professionalism.
It s one of the easiest hurdles to cross but
many a small business owner has entered a
bank without this information at the ready.
When and how do you plan on
It is at this stage where the loans officer
separates the wheat from the chaff. To ensure
you ll be milled, and not rejected, your his-
torical and pro forma operating statements
should demonstrate the necessary cash flow
to cover debt service as well as provide for
the continued profitable running of the busi-
Be careful to avoid two extremes, the first
being to paint too unrealistic a picture in your
projected cash flows and the second being
to present a statement which shows that your
business profits will be used in their entirety
to repay this bank loan. Sound market research
will allow you to more accurately define these
Should you have the funds to hire a con-
sultant to prepare a professional set of finan-
cials, remember that as chief cook and bottle
washer, the bank will still expect you to be
knowledgeable about every detail. Those pro-
jections are only worth as much as your ability
Are you a good risk?
Getting a small business loan:
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