Lending - The Basic Criteria

Summary

Anybody who lends money always considers (to a various degree) the following factors:

Remember it is quite unusual for all of the above factors to be completely satisfied.  One or two points will most likely be stronger than the rest.  Do not be discouraged if this is the case.  Make sure that you focus on the strong points and are aware of the weak ones.  All projects have them.

SOME TIPS FOR THE PRESENTATIONS TO LENDING INSTITUTIONS

• Be absolutely familiar with all the data in the proposal.

• Do a trial run presentation with a confidant.  (Try some stress-producing questions.)

• Never just "drop-in".  Be sure to arrange a definite appointment with the appropriate manager.  Confirm it a day in advance.  Do not accept a "Come in any time" appointment.

• Unfortunately, managers have difficulty with their appointment schedules.  Therefore, decide whether or not you wish to wait.  If not, reschedule your appointment.  Never leave your proposal for the lender to review.  

• Attempt to find out if the manager has formal authority to grant the amount of the loan requested.  If not, make sure that he/she understands your proposal, as he/she now has to represent you to his/her superior(s).

• If you do not feel confident with the manager's understanding of your proposal, you are better off to shop around.

• As one of your conditions for the loan, advise your manager that he/she should visit your business.  Pick him/her up and return him/her if necessary.  It is also a good idea to take your manager out for a friendly business lunch at least once every 12 months.

• Often business owners start their business accounts with the branches they deal with personally.  However, many banks are now formally dividing up their operations between branches that specialize in business (commercial) and those that handle personal accounts.  Whatever the case, make sure that you deal with a trained commercial lender.

• As in any business, banks often put their best people where the action is.  Similarly, large branches frequently have the better commercial lenders.  Their interests are focused on the best money making accounts, which may not be yours.  Smaller branches generally offer more personalized service.  You will have to decide which is the best lending institution for your business needs.

• Good lending officers are frequently transferred, and often their clients are not encouraged to follow them.  If this happens to you, insist on following your lending officer to his/her new posting.  It is important to continue doing business with a representative who understands your business.  Even though the bank may not like you following him/her, they would rather keep your business than lose you to a competitor.

• Bankers are cautious and conservative.  You must be 100% honest with your banker.  Any misleading information may destroy the all-important mutual trust that is required.

• Experience clearly shows that business owners who keep their banker informed of their successes and lack of same get the best co-operation when having difficulties.  Your banker should expect your business to have financial peaks and valleys.

• Banking is basically "You give me what I need and I'll give you what you need."  Just be sure of what you need and what you are prepared to pay for it.

• Try to plan your financing so that your proposal does not appear "urgent".  Planning is an essential management quality.  It is also a significant criterion for loan proposals.  "Urgent" proposals tend to reveal a weakness in management.

Prepared by: Saskatchewan Regional Economic and Co-operative Development