Generally speaking, a well-prepared, coherent project led by one or more motivated creators will have every chance of obtaining bank financing.
Conversely, a project presenting an unbalanced financing plan and few convincing elements on its market will not present sufficient guarantees to attract a banker. It is obvious !
What you need to know before taking out a bank loan
A bank is a company whose main activity is to finance the economy through its public and private enterprises; like any company, it seeks to minimize its risk-taking and optimize its profitability.
Alongside their own commercial requirements, the so-called “Basel III” agreements require financial institutions to respect a certain ratio of own funds in relation to credits granted to consolidate structures in the event of a new financial crisis.
For these reasons, banks loan are extremely cautious in their risk analysis. They generally do not want to risk more money in the project than the creator(s) themselves. In the same way, they prefer to share risks with as many partners as possible to limit the negative effects.
This partly explains why some business creation projects encounter difficulties in obtaining bank financing. These generally involve projects:
Finally, let us point out that each banking establishment has its own criteria for granting or not granting financial assistance to a new company.
The main points of vigilance that make it easier to obtain a bank loan
As a general rule, it is advisable to balance equity and borrowings as best as possible (50/50). However, the bank can reduce its capital requirement to a ratio of 30% on average (70% debt for 30% equity) or lower when the loan finances a “limited risk” business creation of following the standards of the sector concerned.
In any case, a lack of equity will be considered prohibitive by the banker responsible for studying the company’s business plan.
Furthermore, there are other financial solutions to supplement your personal contributions . Discover them!
Competition between establishments
It is recommended to compare the different offers from banks because the terms ( TEG interest rate , repayment duration, guarantee, etc.) can vary from one bank to another. Bringing agencies into competition makes it possible to negotiate better conditions or less restrictive clauses but above all to avoid disappointment when funding is rejected.
Please note: loan processing times can vary from a few days to a few weeks depending on the size of the agency and the level of risk of the project.
If your financing needs are significant, why not consider using a professional financing broker ? For you, it is the assurance of finding one (or more) banks likely to be interested in your project; for banks, it is the assurance of having in hand a file that has already been examined and presentable (therefore deemed solid).
The loan agreement
Whatever the bank and the nature of the project, the decision to grant a loan is always motivated by concrete elements present in the business plan (business plan) but not only. In fact, a business plan developed for starting a business is always built from more or less credible hypotheses. It is essential that these, and more particularly those which target the working capital requirement (WCR) , are as realistic as possible based on documents ( quotes , order commitments, etc.). However, the ability of the manager(s) to manage and develop the business is essential.in the choice made by the bank to lend or not the amount necessary for start-up.