So You're a First-Time Entreprenuer
So You're a First-Time Entreprenuer
by Christine Cooper
Christine Cooper is the executive vice president in charge of Georgian Bank’s
private bank. She has worked with entrepreneurs for most of her 30-year career. She can be reached
at
ccooper@georgianbank.com.
Ever hear the adage: “Banks only want to lend you money when you don’t need it”?
Aspiring entrepreneurs often worry that they will be unable to access the mainstream banking system
because they are venturing into something new. Women entrepreneurs may consider their prospects
even more daunting: Not only are they bucking the trend by the risky proposition of starting a
business, they’re demographically disadvantaged by gender.
Don’t believe the myths.
U.S. Small Business Association figures indicate that 28.2 percent of the nation’s
businesses are owned by women; and among minority-owned businesses, the proportion of women is much
higher. OK, so it’s not parity with a work force of 47 percent women, but it’s a wonderful change
from historical lows. One in 11 women is a business owner, according to BusinessWeek, and their
businesses account for $2.3 trillion in annual revenues.
Despite the market power of women, many new business owners are intimidated by the banking
process. Banking industry consolidation has transformed many local banks into national banks that
leave many entrepreneurs feeling disconnected. A key element that can make the difference between
entrepreneurial success and failure is understanding when you’re bankable. When you have a good
idea going in of what your worth is as a bank customer, you’ll have a much easier time selecting
the right institution to meet your business’ needs.
While business plans and pro formas are key to a loan package, there are certain human
criteria that make a huge difference. At our bank, we consider personal factors such as:
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For example, when a physician came to us wanting to start her own practice, she met our bankability thermometer. She had been successful in a prior entrepreneurial venture that focused on her niche; she had a reasonable amount of liquidity in reserve; and she had a good net worth. She also had an excellent credit history. We were able to finance a building for her new practice and provide her with a working capital line of credit. In addition, we opened operating accounts and assisted with other services, including cash management and merchant services.
Just because a business does not yet have cash flow on its own doesn’t mean it can’t get funding. A potential client still may be bankable if she has a strong business model, product, management, and may have won significant contracts, but she can't fund the manufacturing or capital improvements or personnel to support the project up front. A bank pauses before seriously looking at an entrepreneurial company when it has no track record in the industry or an owner who lacks personal financial strength to support their venture until it is up and running.
Once, the market consisted primarily of locally owned financial institutions. Today, entrepreneurs have a choice of a whole menu of local, state, regional and national banks. Each bank will have a different target customer, and each bank will have guidelines and standards. It’s unlikely, though, that any bank will want to do business with an entrepreneurial company that isn’t well prepared and realistic about its prospects.
You may think that your start-up company isn’t in the “mainstream,” and you may feel that as a woman-owned business you’re starting two steps back. But don’t make the assumption that you’re less appealing as a bank customer. If you have a strong idea, a strong background and a strong plan, you are likely to be exactly the rising entrepreneur with whom an aggressive, pro-business bank wants to partner on the way up.
