You seeks to expand its business using credit in banks? Here are 5 steps that can help you plan and organize this process.
You already know that as important as the decision to access capital is that type of financing you want for your company. One option is to seek loans from banks. This can be an advantage for those who do not want to receive a new partner at the time, but is an alternative which also requires a good deal of organization and planning. To help you in this process, follow the steps suggested to access a bank based in the Guide How to Grow, made by EY.
Step 1: Define the strategy and the concept of growth (indefinite Average duration)
The first thing is to make the growth plan and define the concepts that will lead the operation from there. There are basically two molds for fundraising: the project finance and corporate finance.
In the first case, the company seeks funds to finance a specific project. In this case, the loan will be paid to the generation of a project box, which does not exist yet, so you need to make cash flow forecasts as much as possible accurate - which will show how much can be paid over the years, leaving clear how much can be borrowed.
When it makes a corporate finance, the company takes funds to finance itself. Therefore, the guarantees come from an existing cash flow and accumulated assets, which helps to prove a lower risk for the owners of the resource.
Consider hiring advisors to help you at this stage. They take the company a professional approach to the process of defining the strategy.
Step 2: Structuring the project (Average duration 45-60 days)
This is the step where you must set the funding strategy. This includes the required amount of resources to be pleaded, list guarantees that the company has to offer, define the term, grace, preliminary contractual conditions and check their ability to honor debts in the long run.
The credit payment will fit in generating cash flow expected? The debt will be a problem? If you notice that there are flaws in business that can not be corrected in the short term search for another way to access capital, with investment funds, for example. Often, smaller companies can realize they need to, at first, to get resources to investors to only then be able to build the guarantees that will pave the way to the banks.
Step 3: Addressing the agents (Average duration 30-60 days)
Make a map of banks that have consistent goals with the company's plan - according to sector, type of investment and type of business, for example. This analysis will also indicate which ones have the conditions that fall within the company's project, as the amount available to the loan, the requirements and guarantees, fees and deadlines. From there, we need to find them, present the project and wait for the answers.
If you do not find a satisfactory number of interested banks, reverse logic: instead of finding the one that best fits the company's plans, change the design to meet the bank's requirements leftovers. Still, there is a risk of not finding anyone interested in financing the project. One possible reason for this is the market to be "bad mood" - in this case the solution is to postpone the plan or seek other forms of funding, such as with investment funds. The other reason may be simply that the project does not captivated anyone. When this happens, we need to return to step 2, or reset the project.
Step 4: Negotiate the conditions and sign the contract (Average duration 180-240 days)
Chosen the bank, it's time to sit at the table to negotiate the conditions. At this stage, the assessor is critical because you need to have a thorough understanding of both the company when what variables that banks usually enter contracts. At this point, it's not a matter of just negotiate rates and terms. It is necessary to discuss everything which limits the cash withdrawal and anything that can generate uncertainty as to the payment of the loan. This logic should guide any negotiation.
Still, there are some specific clauses in contracts can be relaxed when a good trading is done. For example, for quite frequently clause which prohibits new debts are contracted, the entrepreneur may ask, since compliance with all conditions and not violating any of the covenants, has the right to seek more resources. So, we need to read the contract carefully to identify if there are clauses that it is better not to accept or attempt to make them more flexible.
Step 5: Monitoring the conditions and results (As long as the loan)
From time to time the bank will inquire about the company's finances to see if everything goes as ideal. In that case, you need to be transparent and communicate. As time goes on and the company shows its strength, financial strength and commitment to the contract, the relationship improves, which can increase the range of benefits in the long run.
Written by Peter dutra
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