One of the biggest challenges that every entrepreneur faces when they are starting out is where to get capital from. Very many people approach banks and other money-landing institutions to try and get some cash to serve as capital base for their enterprise. However, very few banks agree to venture into the unknown and fund ideas whose success is still yet to be determined. But, have you ever wondered why banks are so tight fisted when it comes to lending money for startups?
Knowing what banks want
To start with, it is important to note that banks are in the business to make money. This means that they weigh situations and determine which ones are most likely to be beneficial to them. They will avoid investing in anything that might lead to losses at all costs.
Secondly, it is wrong to assume that banks have a poor attitude towards startups. There are many people that have approached banks with nothing but an idea in their briefcases, but they walked out with full funding. Banks like hearing about a venture that will bring in profit. When they know their money is safe, they will lend it out. However, they are not sure about the safety of their money; it will be a little difficult to get them money.
What to do to earn a loan approval as a startup
If you know you are in need of capital for a budding business, there are several things you can do to make sure the banks listen to you.
- Have a well established business plan. When you present a half cooked idea to a money lending institution, they will not gain the needed confidence to grant you money.
- Have a good credit history. If you have been running the enterprise for a while, make sure you present a plan that shows evidence of growth. Banks want to see potential so that they can invest.
All in all, to answer the question Are the banks ever going to lend to startups; it is safe to say that it all depends on how you present yourself to the bank.