Approaching the Bank for your Startup FundingProbably the most nerve wracking part of the whole process of starting a business is pitching the business to funders – in part due to television programmes such as “Dragon’s Den”. In reality, although you must expect your ideas to come under scrutiny, the actual meetings with bank managers or funding organisations will be more relaxed, without the formal pitches, and will be a two way process.
There are however some ground rules that you must be aware of. Firstly, it is vital that you know your business, and your business plan, inside out. They will expect you to have a grasp on the financials of the business, and to understand exactly what makes money and what the potential warning signs are.
They will also expect transparency and honesty from you. If there is a major weakness in your business, for example a strong competitor or a technological advance that you are not prepared for, you should be honest about this, and explain how you would look to overcome this weakness.
Since the credit crunch, there have been changes in how the banks are set up, and how they motivate their teams. There are also more modern banks which purport to have local decision making authority, and are aimed to help small businesses. In general however, you would expect the following process:
- You would meet with a local bank manager, the level of the banker will depend on the plans of the business (Banks are often divided into small business, commercial, and corporate levels, and the managers in each level are specialists in businesses of that size).
- Once the plan is prepared and the pitch made, the bank manager will review the plan, suggest amendments and make a proposal to the underwriter, together with a case highlighting their support of the plan.
- The underwriter will reply with a decision.