R. Shawn McBride recently spoke about issues concerning using the service of bankers.
Hi folks, Shawn here with you, talking about issues for bankers. If you are building a business, if you are growing, at some point you are going to need more capital and one of really usual avenues to go for is to go to your banker. Go to the bank, and ask for money, right? Get a loan. And a lot of people prefer loans over equity because the loan will typically go away. You pay some fees upfront. You get the loan. You borrow the money. You grow the business. You pay the loan off. And you keep all the upside. So people love it, right?
Equity. You’ve got somebody that’s going to be in it for a long time. They might be hard to buyout. They might be asking questions about the business. They might want management rights. But in order to get the loan, you are going to have to work with your banker. And your banker’s issue is – the banker may love you, they may want to write you a loan, but they typically have an underwriting committee. They have a group of people that look at your loan and decide whether you get the money or not. Those people are typically looking at risk. They want to understand, they want to know that the bank is going to get their money back.
So, what are they looking for? First, they want to look at cash flow, right? Is there money that’s going to come into this business that’s going to be enough to pay back for whatever the loan is? They’re going to look at your existing cash flow, and they are going to look at whatever your cash flow looks like with the new expansion, or whatever you are going to use the money for.
They are also going to be looking at assets. What assets do you have involved? Business assets? And then often these loans are going to come with personal guarantees. So, they want to look at how your personal finances look like. Is there money there? Does the bank have a very good chance of getting paid back? They want to look at these key avenues. Revenues, assets, look at the business overall. They really want to be secure. The bank really doesn’t want to take risks. They want to collect their interest. They want to make money. And they want to return that money to their bank treasury so they can pay it out to the depositors, and grow their wealth. So, a bank is very conservative.
So, when you are working with a banker, they are going to want to understand all of the issues with your business. They are going to make sure they have a very high probability of repayment. And when they start seeing that, that’s when they are going to start lending you the money. That’s also going to let you know you have a good, solid business plan. Because you are going to have to have that business plan in place to do it.
So, if you are thinking about borrowing money, get some people involved. Talk to your banker. Build a relationship with somebody you trust. Work with them. Get your documents in order. Work with an outside consultant. Maybe they have been through this a couple of times so they can help you strategize for that. You really want to be prepared with that bank relationship. You want to show that you are secure. You probably don’t want to approach them twice. You want to get this done at one time. So, you really want to go with your best foot forward. Show you are a secure borrower. Otherwise, they are going to make you wait for some period of time before you can reapply.
So, be very careful about it. Think about it. Understand banking from your banker’s perspective. If these are the types of things you are dealing with and, you’ve got that growing business, successful private business, check out the R. Shawn McBride fans and audiences page on Facebook. Like us. Become part of our community. Communicate with us. Check out videos there. And on the McBride for Business YouTube channel. Subscribe. Like some videos. Give us some thumbs up or thumbs down. Let us know what you need. And let me know how I can help you.
I’ve spent years working with businesses. I love helping people. Whether that’s coaching, training, or speaking. Let me know how McBride For Business can help you, how I can be there to help you do more. And finally, make sure you get your business evaluation checklist at mcbrideforbusiness.com. It will really help you pen-point some issues in your business to help step things up to the next level. I’m R. Shawn McBride. I’m looking forward to talking to you very soon. And I hope that I can help you in some way. Talk to you soon.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Vera Berard.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.