I was talking to someone who is in a position to lend money, he said that an Asian restaurant that he often visits, the owner approached him and asked if he’d borrow money from him. At first, he thought it might be a couple of thousands, but after he learned that it’d be about half a million, that’s no longer borrowing anymore, that’s term money with interest payment and collateral.
This man is highly intelligent and wanted to help, but at the same time wouldn’t take the risk of loaning the money himself because he obviously wouldn’t get it back. He asked for the exact figure, then the borrower went on and explained that he has to care for the whole family, that his sister and her boyfriend needed to purchase a truck because they’re going into trucking business, and another sister needed to buy a house because she doesn’t have a place to live at the moment, but when asked for the exact figure, this person couldn’t come up with one; the deal didn’t go through and now they’re not even on a speaking term.
What kind of impression does the lender have if this is the scenario that’s given, this is more of a visual figure, and he explained to me that he feels like he is being hustled, this is definitely not a way to get a loan and not a good impression. When you ask for a business loan, even from a friend, you have to realize that the answer could also be no, and the information presented in this situation was poorly presented, instead of getting a loan or a potential investor, he also lost a good friend that could have helped him in his day-to-day business decision because this man is a very successful businessman.
Assuming that this person (borrower) went to the bank for a loan and presented this information, the chance of getting a loan is not likely; time is valuable for business(wo)men, rarely can they give anyone matter the attention it deserves, this is especially true of bankers, venture capitalists, and other investors who are inundated with business plans and proposals, a typical venture capitalist can expect to see more than 1000 business plans a year if not more.
Most people don’t read, mainly because they don’t have time, so it’s crucial to make your plan compelling the first couple of minutes, according to Andrew Anker, Venture Capitalist, “The first thing I read are the first two paragraphs of the executive summary. They’ve got to get that right. If they can’t describe it in two paragraphs, if I can’t be dragged in, there’s no way the next five million people can be dragged in. It doesn’t take more than a minute to decide whether a business is interesting.”
Interest statement, just one minute and here, you might spend five months preparing your plan, the cold, hard fact is that an investor or lender can dismiss it in less than five minutes. If you can’t make a positive impression in those critical first five minutes, your plan will be rejected. Only if it passes that first cursory look will your plan be examined in greater detail. The most important aspects of your plan must jump out at even the most casual reader. Even if your plan is intended for internal company use only, it will be more effective if it’s presented in a compelling, vivid form; highlighting specific facts, goals, and conclusions makes your plan easier to review, more effective as a working document, and increases your chances of making a positive impact.
I think in the above situation, since the restaurant is already established, if presented differently, then the chance of getting a loan might be greater, if not from him maybe from his friends, he knew and is a good friend of the president of a local financial institution, but the information was so poorly presented, no wonder he is in a financial bind.
Most lenders primarily look for answers to questions such as, is the business idea solid? Is there a sufficient market for the product or service? Are the financial projections healthy, realistic, and in line with the investor’s or lender’s funding patterns? Is key management described in the plan experienced and capable? Does the plan clearly describe how the investors or lenders will get their money back? Within the first five minutes of reading your business plan, readers must perceive that the answers to all these questions are favorable.
If you’ve guessed that this borrower is a Laotian man, you’re correct, but that’s not an important factor because if his plan and presentation were good, then it’d be considered.