Saturday 31 January 2009

Business Lending

Banks are insisting that they are open for business. It’s all more complicated than just having a new Bank Of England lending rate and they are caught in the media cleft stick with pressures on them to drop rates to borrowers and concurrent gasps when the returns for depositors are examined. They have statutory rules for maintaining an asset position that supports the lending and their commitments and then there are the shareholders to consider who are the owners and to whom the Directors are accountable. In some cases this includes the Public purse for the present which brings us round to where we started.

The mortar that holds all the bricks together is confidence, which continues to take its knocks and spirals on into another round. The self fulfilling prophesy has been much in evidence.

A business can still obtain lending facilities from a Bank, especially if it is sound and well managed and has a sensible well constructed and realistic Business Plan. These are not the questionnaires that you can download and buy in the Stationers. Fill one of those in and you’ll wonder what was the point. You are actually answering someone else’s questions and it deserves to be left unheeded in a drawer somewhere and forgotten., as indeed many of these so called business plans are.

There are various tricks for remembering what should be in an effective plan. One overriding consideration is to think about your audience. What does the Bank need to see in your plan?
They are interested in who you are, what you are about and why you have this business idea. If that is not all strong and respectable you need go no further. You need to demonstrate that your ( plus other partners/directors/key people) have the background, the experience, the contacts and the personal contribution to make the business successful. In short you know what you are talking about.

Then you have to show that the resources you expect to command actually fit the size of your plans. Are you in the right place,  with the right premises perhaps, the right suppliers and the right equipment to do what you are suggesting? Resources include background collateral resources. The bank will never lend just because you have ‘security’- your house equity perhaps. The bank may not lend if you have no security.

Have you researched the potential market? How do we know there is demand in this location for these goods and services in the way you are presenting them?  What about the competition? You don’t have to do what they do, but you do need to know what they do. The market is what is out there for you. The marketing is what you do about it. There are lots of considerations. If it doesn’t fit together and you don’t have the resources for it you cannot present your business to the outside world in the way it deserves.

Does your underlying process and administration let you down? The whole thing is about showing your business plans are rounded and balanced with everything hanging together in a supportive , productive and practical way.

Resources include time, money, equipment, sometimes premises, and always people. They may be customers, staff, suppliers, outside professionals but they have to be there in some measure and you as a business have to deal with them all.

If you have ever watched Dragon’s Den and given it any thought you will have marvelled at the stupidity of some of the punters who have their wonderful idea and have gone no further with their homework. When the market questions or the money questions come up they look blank. Wonderful television, hopeless business.
So be prepared. Get some help from professionals if you need it. Don’t expect too much from the free resources. They have a place but have a wide brief that only goes so far. Read! Your trade magazines, the Bank small business guides, internet guides, and then realise what you know and what you don’t. None of these will do the job for you. In the end it is down to you. The Bank is interested in who it is being approached by because it is you who will have to put this business in place.

Failed businesses report many reasons. There was insufficient demand. There were too many overheads. The truth in some cases is that they did not do their homework properly. The demand was not there in that location, or at that price, or with that appalling service, or with no marketing to support the idea that anyone would actually find it down that obscure narrow lane behind the derelict building.

Setting up a business or building a business is a careful balancing act. Few people are good at everything. Get help for the things that are not your skill. A good consultant does not need to be expensive but he/she will give you the outside view you cannot have yourself. Give Bob Shepherd Associates a call today and let us help you do what you do best by doing what we do best.

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