When entrepreneurs seek financing, banks are one of the players many consider. But what does the bank actually consider when considering a loan for a young business?
I dag deltok Hans Kristian Bekkevard, fagansvarlig for finans og analyse i Marker og Eidsberg Sparebank, i et webinar arrangert av Aggrator. Her delte han sine erfaringer og ga konkrete råd om hvordan gründere kan stille sterkere i møte med banken.
5 pieces of advice from a banker to an entrepreneur
1. Keep control of your finances – especially liquidity
The bank first and foremost assesses whether a loan can be serviced. Entrepreneurs must have strict control over income, costs and liquidity. Many start-ups fail because they start with too little capital and underestimate how long it will take to build up income.
Advice: Carefully calculate your capital needs month by month and allow for delays. It often takes longer than you think.
2. Realistic plans and scenarios
Overly optimistic growth plans and budgets are common. The bank appreciates entrepreneurs who show that they have considered alternative scenarios, what happens if interest rates increase, or if sales fail for a period of time?
Advice: Create plans A, B and C. Scenario work shows the bank that you are prepared for adversity.
3. Conservative financing
Even good business models can be “financed into bankruptcy” if the debt becomes too heavy to bear. An overly aggressive repayment profile can drain the company of capital.
Advice: Match the repayment period of the loan to the life of the investments. The bank is not looking for the upside – they want the money back safely, with interest.
4. The right time to go to the bank
The bank is rarely the first choice for startups. First, entrepreneurs should have a "proof of concept" - paying customers and a model that shows that you can make money.
Advice: Use equity, grants or early stage investors. When the model works, the bank is ready to be a partner.
5. Team and execution ability
Ultimately, it's the people the bank trusts. A strong and cohesive team counts for more than one entrepreneur alone.
Advice: Build a team that knows both the subject and financial management. Remember that in practice the bank does not only lend to the company, but to the people behind it.
Invest in your own expertise
Vil du lære mer? Bli med på full ESSE masterclass med Hans Kristian Bekkevard hos Aggrator 11. september.
The picture in the article is from a visit to Marker and Eidsberg Sparebank in August, and shows Hans Kristian Bekkevard on the left and Bjarne Tvete on the right.