Songbird,
I'm afraid you have some basic misunderstandings about how banks look at business loans:
Heh, I think in some cases I just wasn't expressing myself clearly.
2) To quote: "do banks study the business plan and make their decision based on that, or are there other elements involved?"
If you have done your plan correctly then the bank should be able to make their decision based purely on the information contained in it. Your Plan has to be a totally honest assessment of the good and bad points of your proposed business.
Where small businesses are concerned banks are essentially lending to you, not the business .. you are the business. Your Plan therefore has to bring out how you can make this business work.
That's all I needed to know. Like I say, I've drawn up a business plan before (for a slightly different loan which wasn't from a bank) so I'm comfortable enough, but I just wanted to know that it was this that would make the difference rather than any other aspect of my financial history.
3) To quote: "you shouldn't have to convince the bank that you're earning enough to service it"
Yes you do - the whole basis of the bank's assessment will be whether you have demonstrated that you can afford to service the loan, otherwise, why would they risk lending you the money?
This is where I wasn't making myself clear (I wrote last night's post in a rush). This was still me talking about a credit card rejection. My point was that the bank can't need to know your job, how much you're earning and all that because the business plan contains the means by which you'll service the loan. Doesn't really matter, but do you see what I was trying to say?
4) To quote: "If you can convince them that the equipment wouldn't depreciate, then wouldn't that serve as acceptable collateral?"
No. The amount you are proposing to borrow in relative terms is quite small and the bank probably wouldn't be interested in taking your equipment as security. For small amounts, it would not be cost effective for them to track you down, seize the equipment, organise to sell it etc. At the end of the day your equipment would be second hand and so heavily discounted.
The equipment is second hand already. I can sell it for as much as I bought it for, or very slightly less. But this is fair enough.
Sorry to sound harsh but you need to look at it from the bank's perspective - they are nto a charity and they don't owe you a living! What I sugest you do is go into your local bank and see the small business guy and ask him to explain to you how it all works. you will then have a better understanding of what is required of you.
Good luck
Rob
Heh, you don't sound harsh. I'm already aware of some of what you said (but all very useful), and you answered my question bang on in your second point. Thanks a lot.
I think I'll definitely see the small business chap in my bank though, and make sure I've got it all straight.
Gillie said:
After all, why should the bank lend you money if you are not willing to put some of your own into it?? What does this tell the bank??
Nothing more except that I'm very, very poor.
If I had the money then I'd jump on this. But what you all say makes sense; I suppose I can try and borrow at least some of the money personally from somebody else... Might make the right impression, at least.
Thanks everyone!
