By K.C. Soares, ContributorIN ORDER to ensure success when applying for a loan from a financial institution, there should be certain steps taken by the applicant. These steps are now of even more importance as it is more difficult to access loans due to the consolidation of the financial sector.
It is my opinion that the collateral lending, which dominated the last two decades, is on its way out. This, as I pointed out in previous articles, was one of the main reasons for the collapse of the financial sector. To remain in business bankers are now forced to assess the feasibility of a project and lend on this basis rather than on hunches and on the collateral offered. In short, banking is becoming more sophisticated and persons applying for loans should lift their level of sophistication. For instance, bankers in days gone by never insisted on audited financial statements, while business persons, particularly small business operators, never usually have up-to-date statements. The trained manager is now insisting on audited financial statements.
THE BUSINESS PLAN
When applying for a loan one of the most important things to have is a business plan. The business plan should be presented in such a way that the banker will be convinced that he should provide you with the required funds. First of all, the cover of the document should be attractive, enticing the manager / loan officer to have a read. The lay-out of the document should be simple with easy to understand language. Without even getting to the actual contents of the document, if the presentation is attractive and the document easy to read more than half the battle would have been won. As a matter of fact, it is my firm opinion that a well prepared business plan guarantees at least a 70 per cent approval of the loan while a poorly prepared plan puts the applicant at a gross disadvantage. The banker on seeing a well prepared plan will think that the applicant is organised, and an organised business has a greater chance of succeeding than one which is not.
You have your business plan and you are about to approach a banker for the required funds. I consider it important who is approached.
I have met in my time three outstanding female bankers. These women were on par with, or may be even better than, their male colleagues.
Unfortunately however, not many female bankers are in this class. It is my opinion that female bankers in general are inflexible. If things do not conform with what is in a manual then they are not interested. They tend not to assess a situation on its own merits but prefer to rely on guidelines outlined in a book.
AVOID FEMALE MANAGERS
Here in Jamaica when dealing especially with the small business sector a banker has to be creative. Not many female managers/loan officers are creative bankers. At one stage in my consultancy work, I refused to meet with female managers/loan officers and would await the availability of a male counterpart. Since creative female bankers are few in numbers chances are that an applicant will encounter one who is not. In light of this, my suggestion to someone approaching a bank for a loan is to try and avoid meeting with a female manager/loan officer.
I have had the unfortunate experience of meeting with a female bank manager who was unable to read and analyse financial statements. How on earth can such a manager make an informed decision on a commercial loan application? When I enquired the only loans she granted were consumer loans (loans to buy motor vehicles, refrigerators, stoves etc.). These loans do not require any form of analysis.
Managers like these, when faced with business loans tend to put off loan applicants saying that they are burdened with work when the truth of the matter is that they are not too sure on how to proceed. When in front of the manager/loan officer it is advisable that you speak the bank's language. For instance, instead of saying "the money I have to put in the business" you say 'my equity'. When asking for money to run the business you say 'I need some working capital'. Then again instead of asking for some time before the start of the repayment of the loan you ask for a 'moratorium on payments'. When banking terms are used, the banker will be impressed and more willing to grant a loan.
If the simple steps outlined above are followed then there is every chance of the loan being granted.
K. C. Soares is a former banker and is now a business consultant with Soledad Financial Services Limited. E-mail: soledad@netcomm-jm.com
