When entrepreneurs are seeking financing, the bank is one of the players many consider. But what exactly does the bank weigh when considering a loan for a young business?
Today Hans Kristian Bekkevard, Head of Finance and Analysis Marker and Eidsberg Sparebank, in a Webinar Organized by Aggrator. Here he shared his experiences and gave concrete advice on how entrepreneurs can stand stronger in the face of the bank.
5 advice from a banker to an entrepreneur
1. Keep control of finances – especially liquidity
The bank first assesses whether a loan can be serviced. Founders must have a firm grasp of income, costs, and liquidity. Many start-up companies fail because they start with too little capital and underestimate how long it takes to build up revenue.
Advice: Carefully calculate the 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 a recurring theme. The bank appreciates entrepreneurs who show that they have considered alternative scenarios: what happens if interest rates rise, or if sales fall for a period?
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 “get into bankruptcy” if the debt becomes too burdensome to bear. For an aggressive repayment profile, it can deplete the company of capital.
Advice: Match the repayment period of the loan to the lifespan of the investments. The bank is not looking for a profit – they want the money safely returned, with interest.
4. Right time to go to the bank
The bank is rarely the first choice in startup funding. First, entrepreneurs should have a «proof of concept» – customers who pay and a model that shows that they can make money.
Advice: Use equity, grants or early-stage investors. When the model works, the bank is ready to be a partner.
5. Teamwork and ability to carry out tasks
Ultimately, it's the people the bank trusts. A strong and diverse team counts for more than one entrepreneur alone.
Advice: Build a team that is proficient in both finance and management. Remember that in practice, banks don't just lend money to companies; they also lend it to the people behind the company.
Invest in your own expertise
Want to learn more? Join us full ESSE masterclass with Hans Kristian Bekkevard at Aggrator on September 11th.
The photo 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.