PROBLEM: In popular demonology, bank managers are small-minded Captain Mainwarings, all too eager to turn down loans to entrepreneurs. At NatWest, managers judge applicants with the help of the mnemonic Campari (character, ability, means, purpose, amount, repayment, insurance). The meeting with the bank manager can make or break your venture. So how do you emerge a winner?
WILL IT WORK? First establish whether the business idea is viable by drawing up a business plan, says Ernst & Young partner Andrew Wollaston.
BE RELEVANT. Every bank needs to see a profit and loss account, cash-flow forecast and balance sheet, says Wollaston, ideally for at least 12 months. The bank can then judge whether the business is viable, can identify the key peaks in cash requirement, and can see what its exposure will be.
SHOP AROUND. Play one offer against another. Banks use systems to help them make lending decisions but are open to negotiation on the terms.
AIM HIGH. On an overdraft facility, interest is calculated on a daily basis. Cash shortfalls remain one of the main reasons why businesses fail. As David Hands of the Federation for Small Businesses puts it: 'Better to owe money to a bank than to a supplier.' But ensure you can afford the repayments on a fixed-term loan.
POUND FOR POUND: Put your money where your mouth is. Banks will expect every penny they lend to be secured in the form of property, shares or other assets. 'If somebody doesn't have the confidence in the business to put up their property as security, then why should they ask us to put up an unsecured loan? asks Eric Leenders, small business analyst at NatWest.
DO SAY: 'In my business, cash is king.'
DON'T SAY: 'We haven't worked out how to sell it yet, but it could be worth millions.'