Financial Literacy 101 presented by Bank of Saint Lucia
ACCESSING CREDIT & THE IMPORTANCE OF BUSINESS PLANS
Accessing credit has been for the most part one of the most salient issues for small and medium sized businesses in Saint Lucia. The hard truth is that Banks are less likely to finance startup businesses. Bankers differ from investors, in that depositors’ funds are lent to those who need it with the expectation that these funds are paid back. Banks will not loan money because you “believe” in your business plan. After all, ideas do not pay loans. Banks and financial institutions have an obligation to protect depositors’ money, and will not risk these funds solely on speculation.
On the path to accessing credit, it is important to know the basics even before you approach your financial institution for funds. Knowing who you are and what you bring to the table are essential. If your business is relatively new or if your relationship with the bank is new, you will be required to provide further information.
The more information provided, the easier it is for the bank or financial institution to thoroughly assess the eligibility of the applicant.
Banks and financial institutions require key documents to determine if a business qualifies for a loan, and having a solid business plan is critical in this regard. Here is a brief guide on what is typically expected:
The most important questions to address:
Introduction & Overview/Executive Summary – What is it about?
Management Structure – Who are you?
Operating/Strategic/Marketing Plans – What do you plan to do? Who is your intended market?
Financial Statements/Requirements – What do you need? How do you intend to repay?
What are the Banks’ Expectations?
Clear Indication of Business Background
Your Experience/Qualification in the given field
Introduction of Management of your business
Three Critical Statements:
Income & Expenditure
Projected monthly for first year and annually thereafter
A comparison of your projections to similar industry averages if available
Alignment of Financials
The credit sought should be in line with the financials outlined in your plan
Ensure that your cash flows are realistic and explain
How much cash is required and why it is needed
A manageable business plan with realistic projections will assist considerably in approaching your financial institution.
“Banks and financial institutions have an obligation to protect depositors’ money, and will not risk these funds solely on speculation.”