Banker’s options – Yes, No, Maybe to a loan
Jim talked with a potential angel investor and been turned down. He decided to talk to his banker.
Jim set up the meeting with his banker. He’d discussed the venture previously with his banker and was encouraged to come back and discuss things in further detail when he was ready.
After small talk, the banker talked about the bank’s revolving credit line service. Jim had done business with the bank earlier. He hoped that the conversation with the banker would as well as his previous ones had.
The banker asked for numbers on sales, receivables, inventory, equipment owned, and facilities.
The banker looked at the numbers that Jim produced and asked what he needed the money for. Jim replied, “To finance the next round of inventory.” The banker said, “So cash to finance the inventory to sell?”
“Yes,” said Jim.
The banker said “There’s paperwork for the loan committee, but from what you have told me, we’ll need collateral.
Jim said, “Well we’ve got inventory that we’ve produced.”
The banker replied, “No, real property assets like your house or investments are necessary.” The banker thought we need at 120% of hard assets to give Jim what he needs.
Jim cringed, “I’m not ready to commit to that.”
With that, Jim decided to it was time to figure out how to put the business in a position to get money without putting up hard assets.
Jim Choice: No loan
Banker’s Choice: No loan yet Removed (Grant Loan)
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