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What Investors Want? Series - Insights from Steve Elsom

posted 17 Apr 2015, 01:09 by Adelina Chalmers   [ updated 17 Apr 2015, 01:28 ]
What Bank Managers look for when you ask for a Business Loan?
Insights from Steve Elsom, Area Director, SME Banking, Lloyds Bank

Angel Investors or Venture Capitalists are a way of getting the investment you are after for your business, but they will want equality in your company in return. If you don't want to give away company equity, perhaps a bank loan may be more suitable. Preparing for the meeting you have with the bank is crucial if you want to get a loan.

Steve Elsom is the Area Director for SME banking for Lloyds Bank heading up a team of over seventy relationship managers across East England. Working closely with the local business agencies, Steve devotes much of his time to help support and develop businesses to be better prepared, better informed and more confident when they approach a lender to request borrowing facilities.

I asked Steve what he expects from an SME approaching their bank for a loan.

An obvious first question will be "tell me about you and your business". This is your opportunity to talk with energy and enthusiasm, to demonstrate your knowledge of the market, to convey the direction of the business and your future plans’. The Lloyds manifesto for SME’s is titled ‘Helping Britain Prosper’ and we are committed to provide £1bn of net new lending to SME’s every year, as well as helping 100,000 new ventures start up.

First impressions are very important to Steve. ‘Depending on what author you follow on the subject, we are likely to make our mind up on someone in less than a minute. Remember your parents saying to you ‘you rarely get a second chance to make a first impression? Its true’.In order to build rapport and get a positive outcome from your meeting, you have to generate interest and excitement in the banker's mind. They will be interested in your passion, but passion alone won't be enough: they want to see your energy, enthusiasm and your plans to make your business a success.

Here are the sorts of topics you should cover in your explanation about your business in a meeting for a business loan

  • talk about your expertise and your passion and why you think this business will be a success
  • explain where your idea comes from
  • explain your chosen market and its size
  • talk about the potential product range
  • describe the formation of the business ie shareholder agreements, share holdings etc
  • give them assurance and confidence regarding affordability using interest rate iterations to look at different scenarios.
  • convey your expectations and forecasts for the short (6 months), medium (12 months) and long (3 years) term including what ‘bumps in the road’ you may encounter
  • think about some questions for the bank and be prepared for "what if" questions like: what would happen if interest rates went up by 2%? 
  • make sure that you have practised your ‘pitch’ before you meet the bank. Practise it with friends and family and get feedback. Don’t try to ‘wing it’ on the day.
Steve goes onto say ‘its about preparation, its about that first impression, its about the confidence and articulation, its about a viable business idea and its about you. We genuinely want to help and sometimes that will mean helping at the ‘pre meeting’ stage so as to ensure that you give yourself the best possible chance on the day. We provide start up and ongoing mentoring and can help signpost individuals and businesses through our network of contacts, to deliver a win:win outcome for all’.
If you'd like help to prepare for your upcoming meeting about a bank loan, speak to Adelina Chalmers on how to make a compelling pitch.