USING THE TOOLS

First of all, when an entrepreneur sits down for the first time in front of a banker, he should not only see him as a lender, but also as a financial advisor. Financial institutions offer essential and adapted tools that go well beyond the loan of money per se. For example, a banker can suggest strategies to the young entrepreneur to reduce the risks of exchange rate fluctuations in the context of his international business activities. From the early stages of the project, the advisor provides information on industry standards and practices that will allow the budding entrepreneur to align his first decisions with the right path.

DEFINE THE BUSINESS MODEL

The entrepreneur must also keep in mind that the banker is not a private investor or a financial angel. He will certainly have expectations along the way and, above all, have a different approach from the other players who finance the business project. Generally speaking, anyone the entrepreneur approaches for financing wants to understand the recipe, also called the business model or economic model. We are not yet talking about a business plan at this stage. We must be able to explain what we are selling as a product, solution or service. Who do we offer it to and how do we produce and sell it? What are the material and human resources behind the project? And more generally, the entrepreneur must know the revenue model: how does it generate profits and where the main expenses go? Generally speaking, this is the information that the banker expects to obtain from the first discussion and it is essential that this information is mastered by the entrepreneur and communicated clearly and precisely. In short, this first step allows you to start the discussion and ensure understanding of how to generate value. Once the business model is established, it must be translated into a business plan and serve as a basis for communication with the banker.

MANAGE EXPECTATIONS

Then, it is important to understand that the banker will have expectations, in the short and long term. The latter will not have the same position with regard to risks as an investor. Consequently, a banker will ensure that there is a certain guarantee, from the start. Nevertheless, there are elements that can lighten these guarantees. For example, an entrepreneur who already has customers and income allows the banker to be assured of his ability to repay his loan, but above all to generate even more income and therefore growth.

TELL YOUR PROJECT

The first contact with a banker is generally made with words, as with any other stakeholder in the business start-up process. We start with a story. We give logic to our project, we show that it is coherent and relevant, that the solution offered meets a real need. Not being able to demonstrate that we meet a need is the number one cause of failures in obtaining loans for young entrepreneurs. So we present the project to the financial institution, we define the business model and then we specify the action plan (which will be integrated into a business plan). For example: "I went to get my first 100 customers. Now I'm going to tell you how I'm going to go get my next thousand!"

Also read: How to prepare an eye-catching business plan?

MANAF BOUCHENTOUF

Executive Director and Head of Support within the Entrepreneurship, Takeover and Families in Business Pole at HEC Montréal

Manaf Bouchentouf is Executive Director and Head of Support at the Entrepreneurship, Repreneurship and Families in Business Hub at HEC Montréal. He set up and directs the Banque Nationale – HEC Montréal accelerator as well as entrePrism-HEC Montréal , an innovative incubator whose mission is to support entrepreneurs, particularly from cultural communities.

He is also a coach and instructor in project management, development and provides targeted training in entrepreneurship and innovation, both technological and at the business model level, particularly at the HEC Montréal executive school.

Before joining HEC Montréal, Manaf Bouchentouf held several executive positions in industry in Canada and internationally.