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Inside a banker's mind Add to ...

Finding a supportive banker is the start of one of the key relationships in the life of your business. Understanding how a banker looks at an entrepreneur can increase your chances of success in landing the financing you need.

One thing to understand is that a banker will take an objective look at your business that might not jibe with your vision.

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Sometimes entrepreneurs think they should receive more money than the fundamentals of their business merit, says Steven Karpenko, Director of Small Market Solutions at BDC Consulting. They also often underestimate the riskiness of their project.

At the same time, entrepreneurs shouldn’t forget that bankers are in business too and need to find and keep clients. That can make them an invaluable resource for new business owners.

“Don’t think of your banker only as a source of money, but as source of advice,” says Karpenko. “A banker sees several business plans a week, so it is safe to say he often has much more experience than the entrepreneur.”

You can avoid a potential “no” by stepping back and by taking another look at your business. Whether your plan is to start a business or expand your existing company, here are some key factors a banker is considering when asked for financing.

  1. Your personal and professional profile The first thing a banker will be looking at is your character and previous business experience. “The first impression counts for a lot. From dress and attitude to the way you present your project, the banker will be trying to assess your ability to manage the business.” An updated CV underlining your skills and expertise related to the business should be on your check-list. “It’s like a job interview. Be honest about everything,” Karpenko says.
  2. The viability of your project The first question the banker has to answer when looking at your business plan is: “How realistic is it?” The viability of your project will be assessed in terms of the strengths, the opportunities and the risks presented in your business plan, including financial forecasts, the management team’s experience and the marketing and sales strategy. “You have to convince the banker that the idea keeping you up at night can become a viable business and that you are ready to take it there,” Karpenko says.
  3. Your financial capacity Having a solid credit history says a lot about your trustworthiness and ability to run a successful, profitable business. “The banker is going to look at your wallet,” Karpenko says. A willingness to put a significant amount of money into your business will show your lender that you are committed to the project and willing to share the risk. The banker will also need to know how you are going to use the money, when and how you are going to repay your loan and whether there’s any security that can be pledged against it such as equipment, buildings or personal property. “It might take two or three meeting to sort everything out.”
  4. Your knowledge of the market and the competition The banker wants to see that you have built your plan based on a sound analysis that takes into account the market, the competition and the economic context. Do your own research and show that you know the trends, the opportunities and the risks. “This boosts your credibility,” Karpenko says. “A simple, concise presentation of facts and figures will back up your statements and business plan.”


Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.

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