The banker’s decision to lend loan to a company hinges on the Business Plan drawn by the entrepreneur and submitted along with the application for loan or the plan as laid out in the application itself.
The determinant factors involved in the plan or the requirements of the…
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curity offered and credit rating which are not directly connected to the ‘statistics’ of the plan, but have overall impact on the proposal are also highlighted.
It can be concluded that the business plan properly developed with attention to details is appreciated by the banks and investors. This document also acts as a reference guide not only for the banks and investors, but also to the entrepreneurs to compare the actual performance to the ‘standards’ as specified in the business plan. The achievement of the goal enhances the credibility of the business and the promoters and their trustworthiness.
The business plan carefully prepared seeks to give comfort to the lenders with regard to repayment of loan and implied assurance to them that the servicing of the debt could be comfortably undertaken without undue pressure in the operations and schedule of repayment as agreed would be adhered to. All other factors should be in a position to enhance this comfort level of the banks.
Another important aspect the banker would like to look into is the background of the entrepreneur in terms of his qualifications, experience, skill and capability and reputation of the entrepreneurs, status of the earlier projects if any, the honesty and integrity of the entrepreneur, etc. These factors can also play in favor of the companies in respect of the rates of interest, and the banker could offer a very competitive rate.
If the bankers are satisfied on both these counts, then it is only the question of formalities. However, the other factors assume greater significance in the case of new entrepreneurs. The new entrepreneurs should be able to sell their concept effectively by concentrating all the aspects of the business plan to improve the confidence level of the bankers. Because, the other factors put together should compensate the lack of experience and reputation for the bankers to act upon the proposal favorably.
Under the circumstances prevailing ...
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