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Accessing suitable financing is a perennial problem for entrepreneurial businesses. While the private equity market may be booming for tech startups, companies that need a line of credit or money for factoring have a hard time getting banks to put up cash.

But getting a bank loan doesn’t have to be that difficult. Recently, we asked some small business bankers and entrepreneurs for their advice on getting a ‘yes’ from a financial institution. Here are some of our favourite responses.

Treat your bank like a business partner

“You really have to get to know your bank manager. Invite them into your business to see what you’re doing. Have regularly scheduled meetings so they can understand the peaks and valleys of your business. When I needed immediate assistance with cash flow, my bankers knew what to expect long before that day, because we had discussions about it. We talked about how they could help us and what we needed to do to allow them to support us. All of these things I did very early on helped my bankers feel like they’re invested in my business.”
Maureen Lucas, president, LucasWorks, Windsor, Ont.

Your story matters

“Tell us a story. Help us understand your passion and the reason you’re getting into this business. Sometimes people think the story doesn’t matter and that you only need a financial track record. But you need both. When we’re evaluating an application, we’re not just ticking boxes. We’re trying to understand what entrepreneurs need. If your business is on the edge of the bank’s lending criteria, the story helps get you over the line.”
—Scott Gamble, senior vice-president, Small Business Banking, TD Bank, Toronto

Bring in a hired gun

“We hired an accountant to write a detailed business plan for us, and then set up meetings with a number of different banks when looking for financing for our entire business. We brought our accountant along with us for the meetings, too. Banks want to know your information, and they want to know you can come up with the answers. If it was just me and my business partner, the banker would have asked us all kinds of things about cash flow and how we got those numbers. We’d just be sitting there, staring at her and saying, ‘We’ll have to get back to you.’ But to have somebody in there who really knew what they were doing gave the illusion that we knew what we were doing. The first bank wasn’t able to give us enough capital, so we moved on. We ended up going with a credit union that was willing to help small businesses.”
—Ari Burstein, owner, Marcon Metalfab, Vancouver

Don’t fret about the economy

“The things that will make you successful in this economy are things that will make you successful in any economy. Don’t overreact to the word ‘recession.’ If you do have concerns about applying for a loan, you’re going to have to adapt. If the domestic market is becoming a challenge and you’re looking to expand into an export market, for example, put together a business plan that supports how you’re going to maintain long-term success. Do your research, and understand where the opportunity is and how you’re going to take advantage of it. Be prepared to talk to your lender about that research, ideally with a business plan to show how you’re going to succeed.”
—David Wilton, director, Small Business Banking, Scotiabank, Toronto

Set realistic expectations

“Many clients that come in are trying to grow too quickly [and apply for loan amounts] that, under their current operating model, they can’t afford. So understand what you can afford, because managing growth is really important. If it’s not planned, growth can break the operating model you’ve designed. Businesses can get into a difficult situation, where they may impact current clients because they’re not planning for long-term growth. One piece of advice we always give is to have a network of advisers, people who can really give you a hard reality check and help you develop a sustainable long-term business plan. Developing that network early on sets you off in the right direction.”
—Sarah Adams, vice-president, Small Business Banking, RBC, Toronto

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This article is from the October 2015 issue of Canadian Business. Subscribe now!

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How did you convince your bank to back you? Have you tried any of these methods? Would you? Let us know by commenting below.

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