How to Impress (or Retain) Your BankerNovember 10, 2011
Bankers cannot (and in current economic conditions do not have the resources) provide funds to every (or even the top five) applicant that request or want to renew a loan. Therefore, you must develop an edge to obtain or retain that loan. That edge can be provided by a well-designed presentation. Follow these guidelines and you will find that this presentation is a lot easier to prepare than you think.
A good presentation contains at least five elements:
1. A brief description of the company
2. A description of the key people
3. An industry update
4. Your operating plan
5. A plan for how you will use or continue to utilize the financing
Despite perceptions, banks and other lenders do not lend money solely based on collateral. They like to see a good business presentation to enable them to lend on something more including sufficient cash flow to cover debt service.
Describe what the company does. In your description ensure that you discuss the following:
- Objectives of the company.
- Strategies for the next year and beyond
- Summary of the past year’s successes and an honest assessment of why any of last year’s goals were not met.
A company is as good as its management. Describe the key people, providing details on their background including skills each of them bring to their departments and the management team itself. Share your past year successes with your management team members
The general public hears about the automotive industry almost daily. Local, national and industry media outlets rarely go a day with some store about the industry. Your banker will know a lot about the industry and will probably retain more of the bad news media than the good. To offset this create a strong image of your company or companies you have to:
- Provide him or his credit team with information about your manufacturer’s future plans and how those plans (products or imaging) will affect your near and mid-term operations.
- Tell him why your local performance differs from regional and national statistics
- Update your banker on your relationship with your manufacturer
Tell your banker what your outlook for the coming year is. He will already have heard the national projections, he will have heard snippets of the news from NADA and his team will be collecting information daily.
In your proposal tell him why:
- Your plans differ from other local dealerships
- Your plans are different from what he has heard from the media
- Why your company is a good investment and will actually use the money the bank is setting aside for you. The days of “just-in-case” lines of credit are long past.
This element is often the only one presented. While financing is the key element of the presentation, you have seen there are many other important parts. Here are some of the important components of FINANCING:
- Income statement and balance sheet
- Cash flow projections
- The expenses should relate to penetrating a new market if that is what you planned
- Discuss breakeven point
- Discuss pay back
- Beware of debt-to-equity ratioand debt service coverage ratio
- Explain mandatory factory equity and performance standards
- Specifically describe your request for loans as to amount, timing and repayment terms
And finally, make sure your financial statements are easy to read and assess. To do this try to eliminate:
- Multiple inter-company transactions
- Clear up inter-company balances prior to the year end
- If you multiple companies make it your objective to have each company secure its own financing
- Simplify your shareholder loan transactions, try not to use the account like a personal bank account
Your presentation should consider at least two years each of the above categories.
When you are finished with your presentation, your banker will know you better and will know you know where you are going.