The three questions you must answer in the Financing Notebook
Open the bank office door (that's a gesture that will soon disappear, we'll do almost everything online soon) and go to the manager or the SME manager, they are the ones who can solve your problem and are your interlocutors with the Entity.
You explain who you are, what you do, how many years you've been doing it, how your business works, and who your clients and suppliers are. If you already work with them, explain how your operations have been, and then present your financing needs. When you introduce yourself, you're essentially selling yourself, so make sure you present your best side. If they buy into your project, you'll have made significant progress.
But no matter how well you present yourself, the bank needs to resolve three key issues; without them, there is no credit.
First: What do you want it for?
The purpose is important to define the type or modality of loan; it is not the same to ask for money to finance purchases, sales or stock (current assets) as to buy a machine or carry out installations (fixed assets), as to buy a business (assets with goodwill) or to settle other debts.
Furthermore, there are now very demanding laws for the control of money laundering; if the purpose is not clear, they will ask you many questions.
The best way to resolve this point is to be very transparent in the financing notebook (memorial, report or document that you and/or the entity uses to present the operation to the Risk Committees, who are the ones who really decide).
How are you going to return it?
Banks lend money, and it has to be paid back; it seems very obvious, but sometimes it is not so easy to demonstrate that our business will produce enough profits in the future to meet our commitment.
Three basic rules for the Financing Notebook:
- Our company's history is important; it shows at least the profit and loss statement for two completed years, revealing the margins and the EBITDA (earnings before interest, taxes, depreciation, and amortization). If the EBITDA is negative, access to credit is very difficult.
- Also show a detailed budget for the current year; this will demonstrate that you have control of your management, and you also have the opportunity to show how the results from the previous point are corrected, if they have been negative.
- If your business is new and you have no track record, you can only rely on financial projections; in that case, you need a good Business Plan.
Do you have guarantees?
Banks explain it very well: their business is lending money, not foreclosing on collateral. But if our credit history isn't great and the expected returns are modest, they'll ask for collateral: properties to mortgage, personal guarantees, and sometimes they'll even pledge part of the loan as collateral.
When preparing the notebook, you should anticipate this situation. If your company already has other loans, the profit and loss figures are low, or you have had bad experiences in the past, for example, offer guarantees; don't wait to be asked for them.
And finally, anticipate your needs, apply for credit in advance; the average maturation period for a transaction is about two months, urgency or haste does not help.
Do you have any questions about this topic?
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A graduate in Economics from the University of Barcelona, he is also a Certified Actuary, Real Estate Agent, and Insurance Broker.
He furthered his training with courses in taxation, business valuation, and credit management offered by the College of Economists of Catalonia and the Center for Financial Studies (CEF).
In 2000, he became the managing partner of the firm, and since 2011, he has also been responsible for the Finance Department.
For five years, while already a member of the management team at Àmbit Assessor, he also held the positions of Deputy General Manager and Finance Director at Alco Grupo Empresarial.
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