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Concept:
What you are selling the
banker on, what exactly is involved in the business situation, such
as the type of service, management expertise, and marketing
strategies. Some industries are off limits or not currently
supported by lending institutions. It is important that you
know the current status of your industry.
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Cash Flow:
Prove that there is
cash available to repay the loan. Prepare
a
business plan that shows an equal balance of equity from
principals, equity from outside investors and equity equivalents
(build out allowances, supplier financing or flooring, etc.) in
place. Then have your business plan always have a coverage
ratio for interest and principal of 1.3 or greater.
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Collateral:
Banks aren't
venture
capitalists or
equity participants. However, some banks in
Silicon Valley and other high tech areas will co-investor, or lend
money for
startups is there is already a known venture capital
company or other major investor.
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Character:
What are the credentials of the parties requesting the loan? Do they have positive track records in this industry, do they have
positive banking relationships in the community, and are they known
quantities?
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