Posted on February 22, 2019
Berytech organizes monthly #FinanceFridays, a training program to teach you everything you need to raise funds and finance your startup or SME in Lebanon. Below are tips by Patrick Atme on how to how to successfully approach a financial service provider.
It is important to mull over the lending options accessible to SMEs and figure out the best option for your business. Things to consider when you look for lending options are: the risk appetite of the institution, the collateral’s policy and type of loans they offer. The risk appetite varies from one institution to another and consequently the type of loans offered. Look for the lenders that will best meet your needs.
Before you apply for a business loan, you must have zero doubt on the amount of money you need as a loan. It is very important to know your need and eventual utilisation of the loan. Indicate the type of loan you need, the requested amount and finally the purpose and terms of the loan (duration needed, grace period, etc.). It is always advisable to prepare a business plan to project the time period for which you will require the supplementary financial support.
A detailed business plan is the primary medium of selling your vision and financial strength to the lender. A strong business plan puts forth your company’s story, from its foundation to its relationship with the market. It illustrates your business’ mission and the roadmap for achieving goals. Financial reports provide a complete analysis of what you’ve already accomplished and your future plans. Lenders believe that companies submitting a comprehensive business plan have a better chance to succeed and pay its loan back on time.
How much money you’re personally willing to put into the business; being willing to risk your own money shows the lender that you’re committed to the enterprise.
The collateral serves as a protection for lenders against a borrower’s default. Getting a loan becomes easier if you can offer collateral as a security. The collateral offered can be a piece of land or an apartment, the personal guarantee of a third party, the equipment to be bought, a car or something of value that you own. The type of collateral depends on the riskiness of your project. The higher the risk, the higher the collateral requested.
You need to convince the lender that your business idea is viable, and you are a good credit-risk. The lender is mostly interested to know: “what are you going to do with the money” and “If you have a good repayment capacity to settle the loan on time.” Therefore, you should demonstrate your repayment ability through financial projections. Make sure you present the information in a visual, clear and interactive manner.
About the Author
Patrick Atme– UNDP Consultant, has been assisting the Economic & Social Fund for Development (ESFD) in providing financial and non-financial services to SMEs since 2011. For the past 8 years, Patrick has been delivering financial advisory to small entrepreneurs, helping them applying for loan with commercial banks. Before starting his financial advisory role, Patrick spent 9 years as a risk and credit analyst in the banking sector. After a successful career assessing risk and structuring credit facilities, Patrick now helps SMEs write business plans/feasibility studies to apply for loans. He holds a master’s degree in economics from the University of Paris Nanterre, and is available for business plan writing, as well as private consultations. You can reach Patrick at Patrick1a@hotmail.com.