Banks Make Business Loans. 

          I want to talk a little about business today.  The book I am writing, How To Find The Right Business For You has a chapter called “Myths About Starting a Business.”  One of the myths is “Banks Make Business Loans.”  Here is that section.

        Banks do not make business loans.  It makes me so sad when I hear people wanting to start their own business say that they have to get their business plan completed so they can go to the bank and get a business loan.  They are under the misconception that a bank will make a business loan if the business plan is good enough.  Banks do not make loans based on a business plan.  I will repeat.  Banks do not make business loans based on business plans.  No exceptions.

        I will probably catch flack for this statement, but most bankers don’t even read a business plan and could not evaluate a business plan if they had to make a decision based on that business plan.  The only reason a bank asked for a business plan is to show you have given it some thought. 

       

        The best chance of getting money from a bank based on a business plan is to get one of the bankers to invest in the concept personally.  If you are going to the bank with a business plan to get money, your plan better be to get the banker you are meeting with to be an investor personally. 

        Keith Elwick was a friend of mine from when I was a Ford-Mercury Dealer.  Keith always said he would a lot rather be lucky than good.  There is a lot of truth in that.  Keith described himself as a farm kid from a farm that was all sand on the wrong side of the river. 

        Keith invented the side-fail manure spreader.  None of the implement companies even expressed interest in it except John Deere.  John Deere took the prototype to Moline, Illinois for evaluation and decided they were not interested. 

        Keith decided to manufacture the manure spreader himself.  When he started Hawk-Bilt, one of his initial investors was a local banker.  The Banker invested personally even though he would not make a bank loan to Keith.  Getting money from the individual banker personally is a very remote possibility, but has a much better chance than getting a bank loan based on a business plan. 

        Keith used individual local investors to finance Hawk-Bilt.  Besides Keith’s banker, Keith’s lawyer and several other local individuals invested in Hawk-Bilt.  We will talk more about this type of financing later.

        Keith later invented the big bale baler.  He said if he had any idea what he was doing when he started, he would have known better. 

        Later in the book I expand on how banks make loans on asset equity and credit scores.