Well prepared for the loan discussion

Whether you need a COVID-19 relief loan or capital for an investment, young entrepreneurs face several hurdles when negotiating a loan. Therefore, good preparation is crucial – especially when things need to happen quickly.

This article is part of the special feature GründerNavi – for founders and young companies

Rent payments for retail space, covering ongoing costs, improving liquidity – especially right now, many businesses have high financing needs . New investments also require additional capital. Those who can't finance from their own resources need a loan. A loan consultation with the bank is the first step. With a bank advisor, you'll first define the parameters : What needs to be financed? How much financing is required, and what terms does the bank offer? Naturally, your own financial and business situation is also a key focus . Before banks grant loans, they carefully review borrower applications.

Look for funding programs

To prepare for your loan consultation, you should first get an overview of current interest rates and compare offers from different banks . Also, look into available government support programs. This is especially important for businesses affected by the coronavirus crisis. Specifically inquire about which federal government aid programs you are eligible for.

A key foundation for the loan negotiation is a business proposal in which you present your company and the planned investments. You can also include information from your business plan here . The most convincing candidate is one who can summarize their project concisely and succinctly, supporting it with figures and facts. Even in a difficult financial situation, it's important to remain calm and convey that you are a confident and reliable entrepreneur.

Good preparation is necessary

Roland Wedding, Association of Creditreform eV. Get your free credit check for 2019 now and strengthen banks' trust in your company. Photo: © Creditreform

Good preparation also includes precisely defining your capital requirements and the collateral you can provide. Do you have equity capital available, or are there potential guarantors? What is your liquidity situation? It's crucial that you present your financial situation honestly . Clearly explain why the planned investments are necessary and how they will further develop your business.

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If you were already experiencing financial difficulties before the coronavirus pandemic, you likely have a lower chance of receiving financial assistance. Nevertheless, approach the financing discussion proactively . Explain: What revenue losses do you anticipate in the near future? How much financing do you need? Sugarcoating things won't help. Demonstrate your willingness and ability to repay . What steps have you already taken to maintain liquidity? Can you postpone planned investments, contribute your own funds, or provide collateral?

Since banks need to protect themselves against potential losses, the loan terms depend, in part, on the estimated risk of granting the loan. To do this, banks assess the applicant's creditworthiness in advance using a so-called rating. The credit rating index is based on various criteria, such as equity and payment history.

CHECKLIST

Important documents for the loan discussion

Concrete examples and well-structured documents are essential for the loan discussion. These include, among others:

• Information about you and your professional skills 
• Business model documents
• Evidence of your company's financial situation
• Information on financing needs

You can find out which documents you need in your specific case by phone before your appointment.

Free credit check for companies

Anyone who has found themselves in financial difficulty due to the coronavirus crisis can, for example, rely on loans from the Kreditanstalt für Wiederaufbau (KfW). These are part of an aid program launched by the German federal government to support the economy. The government assumes up to 100 percent of the liability. Approval requires proof that the company has encountered difficulties due to the coronavirus pandemic. Anyone who can demonstrate that their company was financially sound until the end of 2019 has a good chance of obtaining a loan. Creditreform supports entrepreneurs in this area and also provides non-members with a free credit report for 2019, which you can use for your loan application. 

www.boninachweis.de

CONCLUSIONPreparation: You should think in advance about what questions and resistance you can expect in the bank meeting and how you will respond to them. 
self-Assessment: Anyone planning a credit discussion or wanting to keep an eye on their company's creditworthiness should regularly request a self-disclosure. 
Service: You can request a self-assessment free of charge once a year from Creditreform apply for.