Every lender has its own criteria, and every adviser has their own way of running the meeting. This guide describes common questions and does not replace personalised advice.
Does the banker understand your business, and who is behind it?
The business in two minutes
An adviser sees projects from different trades in the same week. They need to understand quickly what you sell, to whom, where and at what price. Prepare an answer in four sentences and say it out loud to someone who does not know your trade. If they ask you to explain a word, rewrite that sentence.
Fictional example: “I am taking over a farm machinery repair workshop on the edge of the village. The customers are about sixty farms within a 30-kilometre radius. The workshop charges for labour by the hour and sells the parts on. I am asking for a loan to buy the tools and the stock.”
The person behind the project
The lender also looks at who will be running the business. Prepare a summary of your background that focuses on what relates to the project: your years in the trade and your management experience, however modest. If you lack a skill, say so and say who covers it, for example a business partner or an accountant. If the adviser asks, you will already have the answer.
Where does your forecast turnover come from?
Turnover is the total of your sales, before any expenses. A lender wants to know how you arrived at that total. Break it down into a multiplication they can follow: a number of sales per day, an average amount, a number of days open.
Fictional example for a hair salon: 9 clients a day, €32 on average, 22 days open, which makes €6,336 a month. Next to each figure, write what it is based on.
| Assumption | What it is based on |
|---|---|
| 9 clients a day | Client numbers noted over two weeks at the salon where you work today |
| €32 on average | Your price list and the usual split between cuts and colours |
| 22 days a month | Open five days a week |
An assumption backed by a count or a quote can be defended. If one of yours rests on nothing, take a low value and say so. Plan for the start-up period too: a business that has just opened often takes several months to reach its normal pace, and your forecasts should show that.
Can the project repay the loan?
What is left each month
A lender wants to see whether the business leaves enough to pay the monthly instalment, that is, the amount to repay each month, once all expenses have been paid and you have paid yourself. Set this calculation out month by month over the first year: money in, expenses, instalment, balance. This table is called a cash flow forecast, cash being the money actually available in the account. If a month drops below zero, show how you cover it.
What you put in yourself
You will often be asked what you are putting in yourself: savings, equipment already bought, unpaid work at the start. List these items with their amount and where they come from. The level expected varies between lenders and projects; ask the adviser.
If sales come later than planned
Redo your table with sales cut by a third for the first six months, or with the opening pushed back by two months. See how long you can keep going and note what you would do, for example postpone a purchase or pay yourself less for a few months. Bring this second version to the meeting, because the question of a delay comes up often.
Which documents should you bring?
The exact list depends on the lender. Ask for it when you book the meeting. Three sets of documents come up often:
- A short presentation, two to four pages long: the business, the customers, the location, your background, the amount you are asking for and what it will pay for.
- Forecasts with their assumptions written down: sales and expenses for the first few years, a month-by-month cash flow forecast for the first year, and a low-case version.
- Supporting documents: quotes for equipment and building work, the draft lease, bank statements, proof of identity, and the company’s annual accounts if you are taking over a business.
Put the supporting documents in the same order as your forecasts, so that each figure points to a document. Bring two paper copies, even if you have sent everything by email.
How does the meeting go?
Allow an hour. As a rule, the adviser lets you present the project, asks questions, then explains what happens next. Your file may then be reviewed by other people, who will not have heard you. So your documents have to make sense without you.
A few useful habits:
- Start with your four sentences, then state the amount you are asking for and what it will pay for.
- When you do not know an answer, say so and offer to send it within two days.
- Write down every question you are asked. They will be useful for the next meeting, here or elsewhere.
- Before you leave, ask about the next steps, how long the answer will take, any missing documents and the security the lender expects.
You can meet several lenders. The questions from the first will help you complete your file for the next.
How can you practise before the meeting?
Do a run-through with someone who is used to accounts, for example an established shopkeeper or an accountant. Have them ask you the questions in this guide and note the moments when you hesitate. Then rework the relevant passages in your documents.
You can also practise with the Scorecard, published by Prelud. It is a conversation of a few minutes that has you present your project in writing: the problem and the solution, the customers, the team and the market. Its Memorandum Pack produces an information memorandum, which describes the project in detail, a business plan, which brings together the financial forecasts, and a pitch deck, a presentation in a few slides. These documents are there to help you prepare, and the decision to lend rests with the lender.
A preparation tool. It is neither a financial valuation nor an investment recommendation.