Advice in business financing

When the time comes to approach a bank to finance the start-up or expansion of a small or medium-sized business, don't take anything for granted. Even though each application is unique, and the sector of activity, target market and many other considerations are all factored in, there are basic criteria that must be met.

To help you better understand the assessment process and maximize your chances of success, here's some information and advice that will help you identify the factors that come into play in credit analysis.

Criteria
How important are personal warranties?
Your business plan is a priority
Maximize your chances!
Your satisfaction comes first!

Criteria

Whether you need financing for a startup or for the expansion of an existing business, each application is rigorously analyzed following a list of clearly established criteria including:

• financial contribution by the entrepreneur and his/her associates or business partners;
• involvement of outside investors;
• company's strengths and weaknesses;
• risk factors involved in start-up or growth;
• project's financial spin-offs and profitability;
• financial latitude and ability to support the company;
• a serious business plan containing credible data;
• knowledge of the sector of activity;
• shareholders' management abilities;
• sales and development;
• technical know-how, etc.;
• ability to absorb fees involved in the process
  (e.g., start-up fees, professional fees, business plan, studies, bank charges, etc.).

How important are personal warranties?

Financial considerations have a major impact on the final decision. If they raise certain doubts, you may be asked to provide personal warranties as well as a suretyship.

Each situation is unique. If your banker considers that a suretyship or personal warranties are necessary, he or she will explain the issues involved and the exact reasons for this decision.

Your business plan is a priority

Any commercial financing specialist will tell you that a carefully prepared business plan based on well researched projections is the way to put your best foot forward with a financial institution. Whether you are starting up a company or expanding an existing one, it's essential.

The business plan is a complete and detailed portrait of your business. It must contain all the information your banker requires to analyze your file and make a fair and informed decision. More specifically, it should contain the following information:

• company background;
• sales and expenses projections that are credible;
• evaluation of your financing requirements;
• facts and information from market research and studies;
• realistic projections;
• marketing plan;
• list of partners and shareholders;
• list of management personnel and their individual skills;
• description of facilities and equipment;
• list of main suppliers;
• company's financial statements for the past three years;
• details on the owner's contribution, equity and security offered;
• information on research and development.

To prepare your business plan, click here.

Maximize your chances!

Every serious application for financing is given careful study. In certain cases, the officer responsible for your file may be prepared to re-evaluate your application after suggesting some changes. However, there are situations in which an application will be declined. Here are some of the most common reasons:

• insufficient financial contribution by the parties involved, or insufficient net worth;
• unrealistic projections or doubtful chances of success;
• possible conflict or problem related to environmental legislation.

Your satisfaction comes first!

The National Bank of Canada is committed to delivering high calibre service and access to financing for the largest number of companies. However, problems do sometimes arise. If you feel that your application for financing has not been properly evaluated or has been declined without good reason, a procedure has been established so that you can express your point of view.

To find out more, please ask for a copy of the code of conduct for businesses at your National Bank branch.