Intangible Capital Value

Our core business: intangible capital valuation

Build a good record of business bank financing in 8 points

Published on: 09/26/2023
By: Erwan Coatnan de Kerdu

The manager of a company may need to take out a loan from the bank for several reasons, including:

  • To finance the launch or growth of the business . Start-up or growing businesses often need capital to invest in equipment, inventory, marketing, or other elements necessary for their development.
  • To meet a cash flow need . Businesses may need cash to pay salaries, bills, or finance short-term investments.
  • To finance acquisitions or mergers . Businesses can use a bank loan to finance the acquisition of another business or the merger of two businesses.

In all cases, the manager of a company must carefully prepare his bank loan application. He must provide the bank with detailed information on the company, its activity, its financial situation, and its needs. He should also be willing to negotiate the terms of the loan, such as the amount, interest rate, and duration. Here is an example of methodology :

  1. Analyze your financing needs
    1. Determine the amount you need.
      1. First, you need to determine the amount you need to finance your project. To do this, you need to consider your project costs, such as capital investments, operating costs, and overheads. You should also consider your current cash flow and your cash flow forecast.
    2. Determine the length of financing you need.
      1. Next, you need to determine the length of financing you need. This will depend on the nature of your project and your repayment capacity.
    3. Determine the nature of the financing you need.
      1. There are different types of financing available, such as bank loans, leases, grants, equity, etc. You must choose the type of financing that best suits your needs and financial situation.
    4. Analyze your repayment capacity.
      1. It is important to analyze your repayment capacity before requesting financing. You need to make sure that you will be able to repay the loan or lease on time.
    5. Consider financing risks.
      1. All financing involves risks. You must make sure you understand the risks associated with the financing you are applying for.
    6. Compare the different financing options.
      1. There are many financing options available. It is important to compare the different options to find the one that suits you best.
    7. Take steps to reduce your need for financing.
      1. Before applying for financing, you can take steps to reduce your need for financing. For example, you can reduce the costs of your project, increase your cash flow or find financial partners.
    8. Prepare a repayment plan.
      1. Once you have secured financing, you need to prepare a repayment plan. This plan should specify the amount you will repay each month or quarter.
  2. Write a business plan
    1. Summary
      The executive summary is an overview of your business plan. It must be concise and convincing. It should summarize the main points of your business plan, such as your company, your market, your strategy and your finances.
    2. The company
      This section should provide a detailed description of your business. It should include information about your story, your mission, your products or services, your customers, your competitors and your team.
    3. The market
      This section should provide an analysis of the market in which your business operates. It should include information on market size, market growth, market trends and competition.
    4. The strategy
      This section should describe your company’s strategy for success in the market. It should include information about your goals, priorities, positioning and tactics.
    5. Finances
      This section should provide a financial analysis of your business. It should include information about your financial statements, your cash flow analysis and your profitability plan.
    6. The team
      This section should provide a description of your management team. It should include information about the skills, experience and qualifications of your managers.
    7. The risks
      This section should identify the main risks your business faces. It should include information about the steps you have taken to mitigate these risks.
    8. Conclusion
      The conclusion should summarize the main points of your business plan and remind the bank why your business is a good investment.
  3. Prepare your financial statements
    1. Balance sheet
      1. The balance sheet is a financial statement that presents the financial position of your business at a given point in time. It should include information about your assets, liabilities and equity.
    2. Status of the results
      1. The income statement is a financial statement that presents the financial results of your business over a specific period of time. It should include information about your income, expenses and net profit.
    3. Statement of changes in equity
      1. The Statement of Changes in Equity is a financial statement that shows changes in your company’s equity over a period of time. It should include information about your profits, losses, dividends and other changes in equity.
    4. Cash Flow Statement
      1. The cash flow statement is a financial statement that shows your business’s cash flow over a period of time. It should include information about your operating cash flows, your investing cash flows, and your financing cash flows.
    5. Notes to the financial statements
      1. Notes to financial statements are supplementary information that provides details about items in the financial statements. They should include information about the accounting methods used, significant events that occurred during the period, and the risks and uncertainties your business faces.
    6. Comments on the financial statements
      1. Financial statement commentary is an explanation of your company’s financial results. They should provide an analysis of your financial performance and future prospects.
    7. Vouchers
      1. Supporting documents are the documents that support the information in your financial statements. They should include copies of invoices, contracts, bank statements and other relevant documents.
  4. Write a cover letter
    Example of a cover letter for a business loan from the bank:


    My name is [your name] and I am the [your title] of [your company name]. I am contacting you today to ask you for a loan in the amount of [the loan amount] euros.

    [Your company name] is a [nature of your business] company that was established in [year of creation]. We are currently growing and need to invest in [investment description].

    This loan will allow us to [describe the use of funds]. Through this investment, we expect [description of expected results].

    I am attaching my business plan and financial statements to enable you to evaluate our request.

    Thank you for your attention to my request. I am available to answer your questions if necessary.


    [Your name]

    [Your title]

    [Your company name]

  5. Prepare additional documents
    1. Commercial contracts
    2. Estimate
    3. Marketing studies
    4. Activity reports
    5. Tax returns
    6. Solvency certificates
    7. Guarantees
    8. Prepare your presentation
      If you are invited to present your financing application to a banker, you must prepare carefully. Rehearse your presentation several times to ensure it is clear and concise.
  6. Answer the banker’s questions
    1. Introduce yourself and your business.
    2. What is your financing need?
    3. How will you use the funds?
    4. What is your growth strategy?
    5. Who are your competitors ?
    6. What is your competitive advantage?
    7. Who is your target market?
    8. What is your forecast turnover?
    9. What is your projected net income?
    10. What is your cash flow?
    11. What is your repayment capacity?
    12. What are your guarantees?
  7. Track your file
    1. Ask your banker for a waiting period. This will let you know when you can expect a response.
    2. Contact your banker regularly to check the progress of your file.
    3. Stay available to answer the banker’s questions.
    4. Be prepared to make changes to your application if necessary.
      1. Here are some concrete actions you can take to monitor your file:
        1. email your banker to check the status of your file.
        2. Go to your bank to meet your banker and discuss your request.
        3. Ask your banker to tell you what documents you need to provide.
        4. Prepare the requested documents and give them to your banker.

For further :

Main financial ratios used by banks to assess the solvency and profitability of a company are:

  • Debt ratio: Debt ratio = (total debt / equity)
    • it measures the share of debt in the company’s total equity. A high debt-to-equity ratio indicates that the company is highly leveraged and may have difficulty repaying its debts.
      Improve your debt ratio:

      • Reduce your debt : Pay off your existing debts to reduce your debt-to-income ratio.
      • Increase your equity : Increase your profits or bring in additional capital to improve your debt-to-equity ratio.
  • Current ratio: Current ratio = (current assets / short-term debt)
    • it measures the company’s ability to meet its short-term obligations. A high current ratio indicates that the company has enough cash to repay its short-term debts.
      Improve your general liquidity ratio:

      • Increase your cash flow : Increase your sales or reduce your expenses to increase your cash flow.
      • Reduce your short-term debts : pay off your existing debts or refinance them on more favorable terms.
  • Gross margin ratio: Gross margin ratio = (gross margin / turnover)
    • it measures the profit margin made on the company’s sales. A high gross margin ratio indicates that the company is efficient in managing its costs and has a significant profit margin.
      Improve your gross margin ratio:

      • Reduce your costs : negotiate lower prices with your suppliers, optimize your production or distribution processes, etc.
      • Increase your selling price : increase your selling price based on inflation or the increase in the added value of your products or services.
  • Return on equity ratio: return on equity = (net income / equity)
    • it measures the profitability of the company’s equity. A high return on equity ratio indicates that the company is profitable and generating a positive return on its shareholders’ investments.
      improve your return on equity ratio:

      • Increase your profits : sell more, reduce costs, etc.
      • Increase your equity : increase your profits, provide additional capital, increase your fair value, etc.
  • Inventory turnover ratio: Inventory turnover ratio = (sales turnover / average inventory)
    • it measures the number of times the company’s inventory is sold in a given period. A high inventory turnover ratio indicates that the company is efficient in managing its inventory and not leaving it in stock for too long.
      improve your inventory turnover ratio:

      • Sell more : Sell more products or services to reduce the shelf life of your products.
      • Reduce your inventory : Keep less inventory in stock to reduce tied up capital.
      • Optimize your supply chain : Optimize your procurement and distribution processes to reduce the storage time of your products.

The guarantees that the bank can accept for a business bank loan are as follows:*

  • The personal guarantee of the manager : the manager of the company acts as guarantor for the loan, which means that he personally undertakes to repay the loan in the event of default of the company.
  • The guarantee of a third party : a natural or legal person other than the manager of the company can act as guarantor for the loan.
  • The mortgage : the company’s real estate is used as security for the loan. If the business fails, the bank can seize the property to repay the loan.
  • Collateral : movable property of the company is put as security for the loan. If the business fails, the bank can seize the movable property to repay the loan.
  • The guarantee of a guarantee organization : a guarantee organization, such as Bpifrance, can guarantee the loan. If the company defaults, the guarantee organization repays the loan to the bank.

Risks you can identify and manage in operating your business:

  • Financial risks : such as credit risks, foreign exchange risks, interest rate risks, etc.
  • Operational risks : such as risks of stock shortages, risks of machine breakdowns, risks of cyberattacks, etc.
  • Legal risks : such as litigation risks, risks of regulatory violations, etc.

With details of the main risks

  • Human errors
    Human errors are the most common cause of operational risks in SMEs. These mistakes can be made by employees, customers or suppliers. They can be due to poor training, fatigue, excessive pressure, or a lack of alertness.
  • Hardware or system failure
    Hardware or system failures can cause business interruption. These failures can be caused by a manufacturing defect, normal wear and tear, improper handling, or a natural disaster.
  • Cyberattack
    Cyberattacks are becoming more and more frequent and represent a major risk for businesses. Cyberattacks can lead to data loss, systems paralysis, or even business bankruptcy.
  • Legislative or regulatory change
    Legislative or regulatory changes can have a significant impact on a company’s activity. These changes may make certain products or services obsolete, or result in additional costs for the company.
  • Flood, fire, natural disaster
    Floods, fires and other natural disasters can cause significant damage to a business’ property and infrastructure. These disasters can result in business interruption and significant financial losses.
  • Social conflict
    A social conflict, such as a strike or demonstration, can disrupt a company’s activity. These conflicts can lead to production losses, delivery delays, or loss of customers.
  • Food safety incident
    A food safety incident can result in product recalls, loss of customers, and significant financial damage to the business.

It is important for SMEs to have an operational risk management system in place to identify and mitigate the risks they are exposed to. This system must include the following elements:

  • Risk mapping : this mapping makes it possible to identify the main risks to which the company is exposed.
  • An assessment of the criticality of risks : this assessment makes it possible to determine the potential impact of each risk on the company.
  • Prevention and mitigation measures : these measures reduce the probability and impact of risks.

The main obstacles to the granting of business loans by banks are as follows:

  • The solvency of the company . The bank must ensure that the business is able to repay the loan. It therefore examines the financial situation of the company, in particular its turnover, profits, assets, and liabilities.
  • Credit risk . The bank must also take into account credit risk, i.e. the risk that the company will not repay the loan. It therefore examines the credit history of the company and the risks to which it is exposed, such as competition, technological changes, or regulations.
  • The profitability of the loan . The bank must ensure that the loan is profitable for it. So she looks at the interest rate the business is willing to pay, as well as the fees associated with the loan.

Non-exhaustive checklist to validate that the business financing application file is complete:

  • Company information
    • Extract K bis
    • Act of incorporation
    • Statuses
    • Contact data
    • Company history
    • Financial situation
    • Business plan
    • Funding Objectives
  • Information about the manager
    • Resume
    • Professional experience
    • Training
    • Personal financial situation
  • Project information
    • Project description
    • Project budget
    • Financial plan
  • Funding information
    • Amount of funding requested
    • Interest rate
    • term of the loan
    • Guarantees

Prepare the interview with the banker to obtain bank financing:

  1. Find out about the bank
    Before going to the interview, take the time to find out about the bank from which you wish to apply for financing. This will allow you to better understand its products and services, as well as its loan granting criteria.
  2. Prepare your file
    Make sure your file is complete and well organized. It must contain all the information necessary for the banker to evaluate your request.
  3. Practice presenting your project
    The interview with the banker is an opportunity to present your project to him and explain why you need financing. Practice presenting your project clearly and concisely.
  4. Be prepared to answer questions
    The banker will ask you questions about your business, your project, and your financial situation. Be prepared to answer these questions honestly and transparently.
  5. Be confident
    Confidence is an important element during a financing interview. Be confident in your project and your abilities.
  6. Be ready to negotiate
    The banker will offer you loan conditions. Be prepared to negotiate these terms to get the best interest rate and term possible.
  7. be patient
    Obtaining bank financing can take time. Be patient and don’t get discouraged if you don’t receive an immediate response.
  8. Be positive
    Leave a good impression on the banker. Be positive and enthusiastic about your project.

By following these tips, you will increase your chances of obtaining bank financing and growing your business.

Here are some additional tips for preparing for the banker interview:

  • Wear professional clothing
  • Arrive on time
  • Be respectful
  • Be punctual


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