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Have You Ever Thought of Joining or Forming a Consortium?
Are you an entrepreneur but don't like selling alone? A consortium is a combination of different industry-types of entrepreneurs working together to attract business as a group. Even though each member maintains their individuality and operates as...
Leadership Development: Turn On Your Employees
The concept of leadership development is not new. Over the last few decades, many scholars and business leaders have written books, articles, and curriculum on this topic. So, why another article? Simply put, the message isn't getting to front...
Setting Goals and Implementing Change
One of the most important aspects of management is implementing change and setting goals. Managers must decide what their goals are and how they are going to achieve them. This is a basic part of strategic planning. Setting small goals is a small...
Setting You Sails - The Mission Statement
Web Power - Mission Statement: We are dedicated to enabling web entrepreneurs to maximise their revenue by providing high quality, online learning information. Setting Your Sails Where are you going and how are you going to get there are two...
Starting a Small Business Is Just Like Running the Peachtree...Only Tougher
STARTING A SMALL BUSINESS IS JUST LIKE RUNNING THE PEACHTREE…ONLY TOUGHER I started jogging several years ago. It was a New Year’s resolution. Like most of my New Year’s resolutions, I was confident at the time that the euphoria of the holiday...
 
What To Consider Before Approaching Lenders

Dealing with a bank doesn't have to be like walking through a maze in the dark. Keeping the following points in mind when you approach a bank should help you through the process.

Lenders are looking to satisfy themselves of the following:
1. That the business can make the regular interest and principal payments
2. That the lender can get its money back if something goes wrong

When approaching a financial institution, you are effectively selling the merits of your business and your proposal. Consider the needs of the lender, if you were lending money to someone what would you ask for?

Be prepared to answer questions about your industry, your company, your management, the principals of the company and the financial statements.

If you are looking to finance property or used equipment, you will most likely need an appraisal.

In today's environment, an environmental study may be required on commercial real estate.

Lenders will look at the ability to service debt. You will need to show an ability to service the debt plus a sufficient surplus to cover any contingencies, such as unexpected costs or a drop in sales. Use 1.4 times coverage as a guide; both historical financial statements and a cash flow forecast and projected income statement will show this.

The bank will want to make sure that existing debt, or the addition of new debt, will not bring the Debt/Tangible Net Worth ratio of the company too high. What figure is used depends on the industry you are in and what stage of growth you are at. Don't be surprised if the bank asks for hard security to help support the lending request.

The bank in almost all cases will want a complete personal statement of affairs, and a personal credit history will be reviewed to ensure you are responsible with credit.

Your level of commitment to the company will be reviewed; for example, how much equity have you put


into the company?

If your company cannot repay its debt, the bank will evaluate what the secondary source of payment is; this can include security such as businesses assets that can be liquidated, personal guarantees and/or other sources of income.

Give the lender sufficient lead time to review the request, particularly if you are new to the financial institution. It can take some time to review all the information, often clarification is needed and the business may need to be visited before any financing is approved. As well, most often the request needs to be referred to the institution's risk management for review.

A good business plan is important, but keep it concise and don't overdo it on the documentation. The cash flow and balance sheet are of particular importance. Before preparing the final draft of the plan you may want to set up a preliminary appointment with a financial institution, be prepared to answer questions such as: how much money is being requested, why, what terms are you looking for, what are your alternative sources of repayment?

The reality is that banks are conservative lenders and will try to mitigate most or all of the risk away. At the very least you will probably have to provide a personal guarantee to some percentage of the total outstanding amount borrowed.

Fees are a fact of business financing, you can negotiate and may get some reduction (in fact you should always try), but lenders are not in the business of losing money. Interest rates are based on the type of loan, the perceived risk of the business and financing and the security being held in support of the loan.

About the Author

Jeff Schein is a CGA and offers advisory services in the areas of business planning, loan proposals, business modeling, strategic planning, business analysis and financial management for new ventures and growing small businesses. www.companyworkshop.com

 

Strategic Planning (in nonprofit or for-profit organizations)
Adapted from the Field Guide to Nonprofit Strategic Planning and Facilitation. ... First, a Point About For-Profit and Nonprofit Strategic Planning ...
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Basic Description of Strategic Planning (including key terms to know)
Adapted from the Field Guide to Nonprofit Strategic Planning and Facilitation. ... Strategic planning often includes use of several key terms. ...
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Strategic Planning, Strategic Plan, Business Strategy, Strategic ...
Strategic planning advice with free strategic planner & sample strategic plan covering mission statement, SWOT analysis with business plan software for cash ...
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Strategic Planning
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Strategic planning - Wikipedia, the free encyclopedia
Strategic planning involves defining objectives and developing ... Strategic planning uses "the big picture" to pursue large scale, long term objectives. ...
en.wikipedia.org
 
08/26/96 STRATEGIC PLANNING
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Dr. Strategy - Dr. Pete Johnson, Keynote Speaker, Marketing ...
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Strategic Planning Society: Strategy Development and Implementation
Strategic Planning Society: Strategy Development and Implementation.
www.sps.org.uk
 
Guide 7
Strategic Planning in Smaller Nonprofit Organizations ... In short, as a result of a strategic planning process, an organization will have a clearer idea of ...
www.wmich.edu
 
STRATEGIC PLANNING MANUAL
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BPubs.com: Strategic Planning & Business Planning Articles
Business Publications related to Corporate Strategic Planning.
www.bpubs.com
 
Strategic Planning Tools
Strategic Planning is a method for positioning an organization to take ... A strategic planning process incorporates an in-depth planning model that takes ...
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Center for Simplified Strategic Planning, Inc.
The Center for Simplified Strategic Planning offers training, seminars, consulting, speakers, workshops, a book and a newsletter on strategic management for ...
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LEADERSHIP: Strategic Planning and Strategic Management
Introduction: Is strategic planning really worth it? ... The purpose of strategic planning is to encourage thinking about your organization's "big ...
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The CEO Refresher Archives - Strategic Planning
When done right, the integrated strategic planning process can take a ... Strategic Planning and Project Management: The Key to Successful Implementation ...
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HEFCE : Publications : 2000 : 00/24 - Strategic planning in higher ...
This guide reviews good practice in strategic planning in higher education (HE). It originated in a consultation exercise which we held in 1998 to review ...
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The Association for Strategic Planning
The Association for Strategic Planning (ASP), is a non-profit professional society whose mission is to enable people and organizations to succeed through ...
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Amazon.com: Strategic Planning for Nonprofit Organizations: A ...
Amazon.com: Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook: Books: Michael Allison,Jude Kaye by Michael Allison,Jude Kaye.
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Amazon.com: Simplified Strategic Planning: A No-Nonsense Guide for ...
Amazon.com: Simplified Strategic Planning: A No-Nonsense Guide for Busy People Who Want Results Fast!: Books: Robert W. Bradford,Robert W. Bradford,J. Peter ...
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