WHAT A BANK NEEDS TO KNOW ABOUT YOU:General Credentials, Financial Situation

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SME Management (MGT-601)

Lesson 21

WHAT A BANK NEEDS TO KNOW ABOUT YOU

This section discusses the information lenders may need to have before they can assess your request for

finance. As stated earlier, it is good to policy to be as open and transparent with your bankers or financial

advisers as you can. This will enable them to grasp the full situation and to give you appropriate advice. To

withhold important information, such as your possible liabilities with other lenders or the fact that you have

already pledged your assets, may cause difficulties at a later stage.

General Credentials

If the leader you have approached does not already know you well enough, it is best to have some general

background information ready. This may include the following:

Letters of introduction: If you are relatively new in business and not yet known in your business

community, you may find it worthwhile to seek the sponsorship of someone respected by other business

people who is sufficiently acquainted with you to be able to give you a reference. A short letter, setting out

your achievements and testifying to your good character and integrity, is a traditional method of

introduction. Its effect will be positive if the referee is a person well regarded in the business community.

Your Profile: This is a resume or curriculum vitae, setting out your educational achievements, professional

training, qualifications and experience, and your employment record and achievements. It is a helpful

introduction to you and need not be longer than a page or two. If you are a newcomer to the business

community, your profile will help your bank to assess your capacity for conducting trade, producing goods

and services for export, and managing people.

You may also want to attach to your profile any certificate or reference from former employers if you feel

this will help to show up your experience and capacities, especially if the employer is known and respected,

and has written favorably about you.

Brochure on your business: Do not hesitate to hand out your company brochure. This should state what

business you are in, what your products are and how long you have been trading. A list of clients or

customers will be very helpful. If the list is confidential, you should say so when you give it to your banker.

If you are in partnership or have directors in your company, state who they are and draw up a very brief

resume on each, particularly if they have a good reputation in the business community.

Bank and other references: If you are approaching an institution that is not your current bank, it is

important for you to provide bank references that will enable the person you are discussing with to check

your credentials, particularly with regard to regularity of payments, past borrowing record and general

standing. You may also give the names of your accountants and lawyers if this is helpful.

Proof of company ownership or registration: You may be asked to provide evidence that the company in

whose name you want to borrow belongs to you or has been duly registered. You may also be required to

provide a sworn list of assets and liabilities in the absence of audited or approved accounts. Always try to

find out beforehand whether there are any particularly eligibility criteria for which you need to produce

documents or statements.

Checklist for a Career Profile or Curriculum Vitae

Keep the profile or CV short one to two pages at the most. Focus on significant information. Avoid too

much detail. Your professional experience is most important part of the profile. Present your profile in the

order suggested below.

Name: Your given and family names.

SME Management (MGT-601)

Personal Details: Address, telephone and fax numbers; marital status; date of birth; nationality, or

residence or work-permit status if you are an expatriate; state whether you are a home-owner; list your other

significant assets (property, land, interest in other companies, etc.)

Education and qualifications: Start with your most recent qualifications, stating where obtained and in

what year. Include relevant courses and seminars. There is no need to go back to your primary schooling. If

you do not have valid qualifications or little educational background, leave this section out altogether. Your

professional experience will be your best qualification.

Professional experience: This is the most important part of your presentation. Start with your most recent

experience. For each firm you worked with, state the starting and ending dates (year or month and year), its

name (if the firm is your own, says so), your job title and your main area of responsibility. Very briefly, state

your principal achievements in each job held. Examples of this would be: "exported US$ 450,000 worth of

cotton garments yearly to Australia over a period of four years;" "managed the firm's assembly plant which

employed 20 skilled workers and produced 850 components a month for export."

References: You should give the names of persons who can vouch for your professional capabilities as well

as your integrity in business matters. Avoid naming senior government or civil service officials.

Financial Situation

A lender will most probably expect you to produce up-to-date financial information on your business. The

standard financial reports you should have ready are:

Balance Sheet, Profit-and-Loss account, and Cash-Flow Statements:

According to the prudential regulations if the loan amount is less than Rs. 2 million financial accounts of

the business, signed by the borrower are required. The borrower and internal auditor of the bank, or a

charted accountant must sign the accounts where the loan amount exceeds Rs. 2 million, accounts signed by

a practicing Chartered Accountant, or by a practicing Cost and Management Accountant in case of a

borrower other than public limited company, which is a subsidiary of a public company.

The size of your balance sheet and the amount of equity in your business are significant, but by no means

has the determining factored in your banker's decision to grant you short-term credit. Your banker may be

far more concerned with the transactions that the facility will finance, as shall be explained later.

If your audited accounts are more than, say, three months old (that is, if the closing date of the accounts

goes back three months or more), you should also have with you a recent operating statement and cash flow

statement.

Budget for the Current and Coming Year

This document should show your projected sales and revenues for the current period or the coming year, as

well as your operating costs and overheads. You should also have a separate paper showing your planned

capital expenditure, if any. Your budgeted (or estimated) revenue should be sufficiently detailed to be

creditable. In other words, the figures must not be simply wishful thinking but based on firm and tentative

orders to which you may add orders anticipated on the basis of past performance.

Book recommended

How to approach Banks by ITC/SMEDA

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