Last week at Ivey, Desjardins Bank along with local entrepreneur and Ivey Professor Dave Simpson ran a Financing for Entrepreneurs event, hosted by the HBA Entrepreneurship Club. The event highlighted financing tips for young entrepreneurs and addressed how to go about acquiring loans for startup businesses.
Representatives from Desjardins Bank were very helpful in offering the bank’s perspective on the financing issue. They drove home that it is essential for entrepreneurs to set up a bank account in order to track revenue-related activities, in order to establish a relationship early. Being able to prove a meticulous banking history, as well as establishing credibility with a major bank will only work in favor of the entrepreneur when the time comes to ask for a loan. Aside from a bank loan, there are many other financing options for new startup companies including: family/private financing, personal savings, a personal LOC/assets, government supported sources of funding, Canadian Youth Business Foundation (providing loans up to $15k), the Community Futures Development Corporation, and even the London Small Business Support Centre, or a small business centre in your area.
Although there are other sources of funding, attaining a bank loan seems to be a common source of capital for entrepreneurs at some stage – whether it be initially during start-up, or later during the growth phase. Dave Simpson suggested thinking from a banker’s perspective. Understand the pain that bankers go through in determining whether to lend to you. Although bankers do want to see a business plan, they know that it is not going to work out exactly as you laid it out; however, they do want to see your assumptions and be able to change them as your plan changes. All bankers really want to do is see if your business plan passes the smell test: does it seem like a solid business idea that can generate reasonable returns? Help bankers read through the plan by summarizing key company milestones, show what your challenges might be and how you’re tracking them to deal with them head on.
Although the business plan does come into account, it is not the only metric that bankers use to determine whether they will lend to you. Bankers are also looking at your personal track record, and proven credibility: What have you done? Who do you know that has done this before? Get involved in your local community to show bankers that you’re not a “flight risk” (you’re not going to take their money and run). Overall know what bankers are motivated by and realize that they HAVE to say yes to some people – this is how they make money! Know what they’re looking for, anticipate questions, and prove that you’re worthy of their money.
Special thanks to the Entrepreneurship Club for organizing a fantastic event.