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How To Make Your Business Attractive To Bankers

Success in business has many colours and being called a successful “business person” or “entrepreneur” is an honour that most of us cherish. It is however not very easy to become a business person, let alone, a successful one. How do bankers measure the successfulness or otherwise of a small business? What are those qualities that make one business attractive to a banker and the other business not so attractive? Is there anything that a typical business owner can do to improve the attractiveness of his or her business to bankers and other potential financiers? These questions have neither a single nor simple answer, but we can surely discuss some of the few qualities that make a business venture, attractive not just to potential investors, but to bankers.
First, your business must be sustainable!!!
What is a sustainable business? To a banker, a sustainable business must meet the following basic criteria:-
Firstly, the business must be easy to run and finance. Secondly, the business must be able to endure for a long time and it must be able to stand up to different kinds of problems that can arise. You cannot build a business on the back of a temporary fad or idea that will quickly disappear.
Here are some important general guidelines on how you can make your small business project sustainable right from the start.
Start Small and then manage your growth.
Starting small means that you leave yourself room to make mistakes without risking everything right from the start. It is a good idea to first test your ideas in the market before taking a plunge head body and feet into the thick of things. Approaching business this way will make it easier for you to manage your business well until you get into the full swing of things. Starting small also means that the funding requirements of your business are small and manageable and it will thus be much easier for you to fund the start-up costs, even from your personal savings. You can then slowly grow the business, whilst exercising good control over its growth. Many small businesses fail, not because they are bad ideas but because they grow way too fast!!!
Keep your business model simple and an uncomplicated
The simplest ideas make the most money!!! Complex project have too many risk factors. It is advisable to keep your business and your strategy simple right from the beginning. Nothing causes more problems faster for a small business, than trying to do too many complicated and difficult things in the beginning. Make sure your business is not overly complex. You as the business owner must understand the business thoroughly and be conversant with how it should run successfully. If the business owner is not sure or even confident about the business, he or she will find it difficult to convince an investor or a banker that they have an attractive business proposition. The enterprise owner must know the ins and outs of his business.
Have a clear market need that you want to satisfy with your products or service.
It is only by concentrating on specific market needs, be it a product or a service opportunities, that a business venture can succeed and grow to achieve its true potential. As the business promoter, you must be absolutely clear on what you want your business to achieve. If you are vague about what you want to achieve, chances are you will never achieve it.
The value of total Commitment.
You need to have complete faith in your business and to demonstrate that faith. You also need to commit your full energy, hard work and single-mindedness to get your business going and also to keep it going. Being a part time, or a half- hearted enterprise owner means you will not pay sufficient attention to issues that affect your business. A banker will not take you seriously if you are a part timer or you have not invested anything into the business yourself. You cannot fund the business 100% from borrowed funds, you need at least to put your own money at stake.
Upgrade your management skills.
Many, if not most, small businesses start from the heart but the business needs to be run from the head. Business requires more of common sense rather than emotions. Small businesses need to be managed as tightly and effectively as any large business. However, most entrepreneurs do not invest the necessary time and effort in getting the right skills required to successfully run the business. As a business person, you must have a basic appreciation of record keeping, customer care, marketing, communication, time-management etc before venturing into business.
Build a sustainable income stream.
This sounds ridiculously obvious, but most business people miss this simple fact. A sound business will be as sound as the cash it generates over a long time. A business is NOT A BUSINESS UNLESS IT PAYS FOR ITS OWN COSTS. Your service or product may be urgently needed in the market, but if your income and sales do not exceed your “outgo” or expenses, you are going to end up in dire financial straits. A business that needs constant external financing to keep it going will not last. A sustainable business is one that generates enough cash to pay its running expenses over and over and over with relative ease. Such a business is attractive to banker to finance because cash inflows are sustainable and any loans have a reasonable assurance that they will be repaid.
Your business Must Satisfy a real market need.
We have already said this before but always be careful and be sure that there is a real and substantial market need for your business and your products or services. Fads, fashion, and luxury products or services frequently run into financial difficulties as soon as customer tastes change. In this respect, market research is critical. You stand better to have a bigger market if you have products or services that are viewed as essential for everyday use. A sustainable business has “repeat customers”. If your business has no clearly discernible and diverse customer base, then chances are, it is not a sustainable business and therefore not an attractive proposition for lenders and investors.

Clive Mphambela is a Banker. He writes in his capacity as the Advocacy Officer for the Bankers Association of Zimbabwe. BAZ expressly invites players in the MSME sector and all other stakeholders to give their valuable comments and feedback related to this article to him on clive@baz.org.zw or on numbers 04-744686, 0772206913
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