4 factors affecting start-up financing | BDC.ca
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What lenders want to see in your business


Access to start-up financing is essential for many start-up businesses. Typically, commercial lenders will look at four aspects of your business when you apply for a loan: your professional profile, your project’s viability, your financial strength and your collateral.

1. Your professional profile

Bankers try to evaluate your ability to manage the project. You must show that you have the experience, skills, determination and self-confidence necessary to successfully carry out your project.

2. Your project's viability

You should have a business plan that is clear, structured and short, but also covers all the elements of your business idea. You need to present at least two years of financial projections as well as an analysis of market size, market potential and positioning.

3. Your financial strength

You will have to reveal your personal and business net worth (assets minus liabilities) so a banker can judge your ability to meet your financial obligations. A banker will also look at your past credit history to gauge the future.

4. Your collateral

Bankers often also look for assets to secure a loan. They invariably ask for some investment on your part as proof of commitment. This investment might have been raised by you privately.

Of all these factors, perhaps the most important is that you have planned out your idea beyond the idea stage. Before approaching a bank for financing, you should be able to predict, and answer in detail, all possible questions about your business, such as how you are going to do it and what its potential is.

You should also have a clear concept of where you want to be in five years, and have a list of steps required to get you there. If you can convince a banker of this, many of the other factors can be negotiated.