First Things First:
You must have a completed business plan. This plan is a marketing piece for you and your idea. You should, therefore, know the plan inside and out and be able to answer any question regarding it.
You should have experience or at the very least a familiarity with the business you want to start. If you donít, you will have a harder time convincing the bank to lend you the money.
You should also recognize that there are certain types of business that have a higher failure ratio than others. This list would include restaurants, bars or any business that sells food products to a customer. This also means that you will have a harder time convincing the bank to lend you the money.
Where Do I Start:
A good place to start is where you bank. When you start here, the bank has a record of your accounts and your credit history.
Talking to the Banker:
Remember that when you talk to the banker, you are accomplishing two things. First you are asking the banker to evaluate your business plan. Can you make money? Evaluating business plans is what bankers do every day so you are sitting in front of a person who knows what they are doing. As a banker asks you questions be sure you can give good sound answers, donít be defensive.
What if a Banker Says NO?
If a banker says no, did you understand why he said no? Were you asking for too much money, did he think you werenít generating a sufficient profit to make money, etc?
Is this good advice? Perhaps you shouldnít engage in this business. Perhaps you can make some changes to your plan.
Where do you Go Now:
If you are still convinced that your plan is a good one or if you have made some changes, where do you go? Consider the following:
Go to another bank. Do they like the plan or do they still see problems?
Consider loans of last resort, such as SBA loans or from the St. Louis County Economic Council, www.slcec.com.
SHOULD YOU START A BUSINESS OR SHOULD YOU BUY AN EXISTING BUSINESS
While there is not right answer, buying an existing business does have the following advantages:
When you open the door your first day, you know you have customers that come to your business.
As you had an opportunity to review the books prior to buying the business you know that the business makes a profit.
Banks are more likely to lend money to a business that has a profitable history than a new business.
If you donít have experience in the business, you can make arrangements with the selling party to stay for a period of time to train you