Use a bank loan to finance your creation project

The Bank Rakyat Personal Loan is a financing solution very widely used by entrepreneurs.

In general, a well-prepared, coherent project run by one or more motivated creators will have every chance of obtaining funding.

On the other hand, a project presenting an unbalanced financing plan and few convincing elements in its market will not offer enough guarantees to seduce a banker. It is obvious!

What there is to know

A bank is a company whose main activity is to finance the economy through its public and private companies; like any business, it seeks to minimize risk taking and maximize profitability.

In addition to their own commercial requirements, so-called “Basel III” agreements oblige financial institutions to respect a certain capital ratio compared to the credits granted to consolidate structures in the event of a new financial crisis.

 

For these reasons, banks are extremely cautious in their risk analysis. They do not generally want to risk more money in the project than the creator (s) themselves. In the same way, they prefer to share risks with as many partners as possible in order to limit their negative effects.

This partly explains why some start-up projects face difficulties in obtaining bank financing. These are usually projects:

  • considered “too daring”,
  • or presenting an unbalanced financing plan,
  • or worn by one or more creators who do not have the experience desired by the bank,
  • or failing to achieve an enough level of own funds,
  • or whose product / service does not seem to meet the needs of the market …

Lastly, each bank has its own criteria for granting financial support to a new company or not.

The main points of vigilance that make it easy to obtain a bank loan

The minimum intake

As a rule, it is advisable to balance equity and borrowing at best (50/50).

However, the bank can reduce its own funds requirement to a ratio of 30% on average (70% debt for 30% equity) when the loan finances a business creation “limited risk” according to the industry standards.

Be that as it may, an absence of own funds will be deemed unacceptable by the banker charged with studying the business plan of the company.

The larger the amount of your contributions, the more likely you are to get your loan.

Whenever possible, solicit your loved ones to get a boost from them. There are tax benefits for them to the key!

 The competition of the institutions

It is recommended to compare the various offers of banks because the terms (interest rate (TEG), repayment period, bond, etc.) may vary from one bank to another.

The competition of agencies allows to negotiate better terms or less restrictive clauses but specially to avoid disappointments when a rejection of funding.

Note: loan processing times can vary from a few days to a few weeks depending on the size of the agency, the level of risk of the project.

If your financing needs are important, why not consider going through a professional finance broker?

For you, it is the insurance to find one (or more) banks likely to be interested (s) by your project; for the banks, it is the insurance to have in hand a file already examined and presentable (thus considered solid).

The loan agreement

Whatever the bank and the nature of the project, the decision to grant a loan is always motivated by concrete elements present in the business plan, but not only.

Indeed, a business plan developed for a business creation is always built from credible assumptions.

It is essential that these, and more particularly those aimed at the need for working capital (BFR), be as realistic as possible based on documents (quotes, commitments, etc.).

However, the ability of the manager (s) to manage and develop the business is paramount in the choice made by the bank to lend or not the amount needed to start.

In order to avoid any stress while waiting for the loan allocation decision, ask how long it will take to process your file during the first meeting with your banker.

In order to avoid any stress while waiting for the loan allocation decision, ask how long it will take to process your file during the first meeting with your banker.

Keep in mind that the banker will primarily look at the ability of your company to repay its loan and thus generate good profitability. You will have to convince him of your ability to do this by showing the coherence between you and your project.

Diversification of funding sources

As banks increasingly want to share the risk of financing a creative project, it is often necessary to find additional resources to finance their project. This may be:

  • obtaining a loan of honor, to supplement its own funds,
  • the creation of a “banking pool”: several banks finance the same project

What to do in case of refusal?

The refusal should not be considered as a negative element but as an additional reflection phase to make the necessary adjustments. Normally, the refusal of a bank must be motivated and argued.

In case of refusal, get closer to a support organization to validate with you your financial assumptions and check the viability of your project.

Know also that it is always possible to appeal to the Credit Mediation whose mission is to facilitate access to credit companies.