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The biggest problem entrepreneurs have when making a pitch is, quite frankly, that they have no idea what they’re doing. As an entrepreneur looking to fund your big idea, you go in, pitch your company to the lender and either get the loan or never hear from them again. If you fail to secure the loan, there is no input or advice about anything, so you don’t learn from your mistakes.

Because lenders tend to be stingy about handing out unsolicited advice on what went wrong, it can be difficult to figure out why you failed. It could be that your business was too risky or you simply weren’t a good fit with that particular lender. But, chances are, your pitch wasn’t up to snuff.

In this article we cover the steps you need to take to get the loan you need to get your company off the ground.

1. Talk to Your Customers Early:

Get out there and sell your product – even if you don’t have the actual product to offer yet. Seek out potential clients and customers, tell them about what you plan to offer and negotiate a commitment for their business. This will provide a client base for you to present when you are trying to secure funding. Lenders are typically more comfortable handing out business loans when they have some kind of evidence that people will patronize the company.On top of looking good on paper, customers can provide valuable insight about your product. Before you spend a dime on the product itself you will be able to collect input on your product from the people who intend to use it. Ask them what they consider to be the pros and cons and adjust accordingly. You can improve your product before it even hits the shelves and give the customers exactly what they need.

2. Try it Out:

Before taking your pitch straight to the lenders you need to practice, practice, practice. Start with family and friends. If you know anybody that has any small business, lending or investing experience, ask for their help. Make your pitch to them and ask for any helpful input on how to make improvements. Find out what worked and what didn’t work for them and apply that knowledge to your pitch.

After you have gathered advice from personal connections, take your pitch into the business world. Practice on your clients and employees (separately, of course). Find out what kind of concerns they have and how they would like to see them addressed. Each group of people will be looking for different things. Customers are looking for something that will improve their life or business while employees are interested in job security. Collecting advice from different sets of ears will make your pitch more diverse and prepare you for any questions that might arise from the lenders.

Ultimately you have to impress the lenders. If your first attempt at a loan proves unsuccessful, take something away from the experience and find out where you went wrong in their eyes. Ask them about their reservations and what kind of things they look for in a pitch. You will be able to better your pitch and, if you ever find yourself back in front of these lenders, you will know what they want.

3. Get Their Attention:

Lenders sit through countless pitches trying to stay awake while all of the information is going in one ear and out the other. You don’t want them to delete your name, face and proposition from their memory as you are shaking their hands and thanking them for their time. You want them to be salivating at the opportunity that you have just presented.

Invoke passion and excitement about your company. Ask and encourage questions. Incite conversation and debate about your business. Relate your business to them to create a personal connection. Promoting lively interaction keeps everyone involved, thus retaining their attention.

4. Provide Options for Investing:

If you are pitching to a bank this will not be a realistic plan because interest rates and options will likely vary depending on your qualifications. However, if you are looking to borrow money from friends, family or other investors, be flexible about how, when and how much you will pay them back. You can offer them high interest over a long period of time or low interest over a short period of time. Interest only, graduated repayment (payments that increase over time as the business grows) and seasonal loans (installments paid only during summer or winter months) are a few other options as well as equity in the company and later investment options if the company does well.

5. Get Organized:

Make sure that you have everything in order. Present neat documentation of your business operation (past, present and future), your loan request and any necessary facts and figures that provide a complete picture of your company.

6. Know Investor’s Motivations:

Understanding why the lender will want to give you money will help you to create a pitch geared toward their interests. You can count on the motive to be making money. The question is how? Some lenders are looking for cash payments with interest on a monthly, quarterly or annual basis. Some lenders may want nothing but equity. Some lenders (family or friends) may want to help you out for personal reasons but are still going to expect monetary compensation for their trouble. Find out what floats your lender’s boat and plan your pitch accordingly.

7. Keep It Simple:

Avoid getting too detailed about the specifics of your product. Lenders don’t care about what you are going to sell. They’re interested in how you are going to sell it and, more importantly, if it is going to sell and how well. They’re interested in the financial aspect of your company.

Don’t try to wow them with jargon and insider talk as you will probably just confuse them. Stick to layman’s terms. Make sure that you can say everything that you need to say in 10 to 15 minutes, speak loud, clear and fluent and make sure that everyone understands. If the lender doesn’t understand what you are talking about then they won’t have any confidence in you or your company and you won’t be getting the loan.

8. Have a Realistic Cash Plan:

A lender is going to want to know how much money you have already raised, how quickly you have spent it, how much you are currently spending and when you expect your revenues to generate a positive cash flow. Having a realistic cash plan proves to the lender that you are going to be a reliable customer.

9. Show Off Your Team:

If a team is only as strong as its weakest link then you want to prove to your lender that your company has no weak links. Outline the work history of all of your managers and employees. Experience with other successful entrepreneurial efforts will boost a lender’s confidence while corporate experience can demonstrate the ability to handle cash flow on a larger scale if your company expands faster than expected. Explain how each person is integral to giving your company a market advantage and why.

10. Keep It Flexible:

Just because your pitch worked last time doesn’t mean that it will work again. Time has passed and things have changed. Your business has hopefully grown into different needs, your team has likely changed or maybe you have taken your original business as far as you can and are venturing into a whole new market altogether. Whatever the case may be, change is the only constant in life so you need to acknowledge any changes that may have occurred and modify your pitch accordingly.

11. Present a Clear Mission:

In order to convince the lender that you have what it takes to be a successful entrepreneur, you are going to have to move past what a great product you have and focus on your mission. Explain the reason behind your business, how it is different from the competition and why it will succeed.

12. Brag on Product or Service:

While it is important not to dwell on how great your product is it is just as important to tout your creation. Describe your product and the competition that it will face in the market. Put some weight behind your argument by providing market research or technical analysis to explain why people will want to buy your product instead of the competitors’ product.

13. Tell The Truth:

A lender is more likely to do business with you if you are trustworthy and credible. If you fudge data, exaggerate the facts or flat out lie about your company’s potential, you will likely be called on it before you see a penny. And there’s nothing harder to repair than broken trust. Even if you are somehow able to transform falsehoods into a check the lender will expect you to perform. When you fail to meet those expectations the lender will lose faith in you and word will get around within your market and to other lenders. Your reputation will be shot. Nothing good can come from lying.

14. Expose Partnerships That Lend Credibility:

Securing well-known investors or corporate partners can aid the validity of your idea. It shows that successful entrepreneurs believe in your product and helps reinforce the idea that maybe you do have something worth taking a chance on. Don’t be afraid to promote these kinds of partnerships, no matter how small they might be, to instill an extra layer of comfort with the lenders about doing business with you. Just make sure that these partnerships are solid. If there is any kind of doubt that a company like this will not be involved then don’t mention it in your pitch. If they do end up pulling out then your credibility would take an unnecessary hit.

15. Find Money From Other Sources:

Lenders want to know whose money is involved. They want to see how much of the owner’s money is at stake, who else contributed, how much others have invested and how much of an equity stake is held by each investor. A clear and concise list of this information will help the lenders quickly ascertain who makes the decisions for the company. Also, if you happen to have the right names on your list then your company’s chance of obtaining a loan can be enhanced.

16. Cite Examples:

Come up with specific instances of exactly how your product has been or will be used. Explain who will use it, how, where, when and why. For instance, if you are planning to sell custom made T-shirts tell the lenders that the shirts could be good for high school seniors around graduation time. You could put the name of the school and the class of 2007 on the back or a class picture. You could put the student’s name on the front and they could have all of their friends and classmates sign the shirt that could be kept to remember that event in their life. These kinds of examples will help the lenders visualize your company and give them a good idea of what direction you are planning to take.

17. Make it Easy To Repeat:

A short, comprehensive summary of your pitch will bore its way into the minds of the lenders and better your chances of securing a loan. Easy to repeat is easy to remember and easy to remember makes it easier for the lenders to cut you a loan. Your company is now on the path to success.

REFERENCES

1. How to Change the World – The Entrepreneur’s New Year’s Resolution: “I Will Fix My Pitch”

2. Inc.com – The Savvy CEO’s Loan Pitch

3. Entrepreneur.com – How to Make the Kitchen Table Pitch

4. Financial Web – Improve the Odds of Getting that Business Loan

5. Business Week – Make Your Financing Pitch Sizzle, The Pitch Coach

6. goBIGnetwork – Everything Follows the Pitch

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Staff :: Jun.18.2007 :: Features ::