Start-Up Financing – How To Convince The Bank With Your Business Idea

It is the founders who are responsible for social, economic and technical progress. Unfortunately, however, in many cases the start-up project fails due to the financing of the business idea. The solution: the loan for founders of credit institutions. However, start-up financing is not simply granted. The founder must prove his business idea and convince the potential investor that he is only taking a small risk. You can find out how to do this best here.

What financing options do you have as a founder?

For you as a founder, the question naturally arises as to where you can obtain start-up financing for your company. There are different ways in which a founder can finance his company. In principle, you can obtain a loan for founders from the following institutions:

  • Cooperative banks: Cooperative often provide start-up financing. As a rule, such financing is also recommended by most consultants. This is because these cooperative banks have a public mandate to support the local economy. In this respect they are more open in their discussions with founders.
  • Private banks: An alternative is of course the private banks. But they have no real advantage over the cooperative banks. Nevertheless, it can make sense to talk not only to one cooperative bank but to several banks at the same time for a loan for founders. This way you can compare the conditions of the start-up financing and at the same time you have a better negotiating position. In addition, it is quite possible that one bank will refuse you the loan while another one grants it.
  • Reconstruction Credit Institute (RCI): Last but not least, the RCI is also a possible option for your loan for founders. However, keep in mind that you cannot simply go to the RCI, but must instead go to a public bank. It is irrelevant whether it is a private or a cooperative credit institution. You can then apply for the RCI Start-up Loan through this public bank. The advantage is that the RCI assumes a large part of the liability for the start-up financing.

A meaningful business plan is half the battle

In order to receive start-up financing, you must first convince the bank of yourself and your business idea. A business plan is the first important step here. It should be noted, however, that the business plan for bank financing differs greatly from that for a support programme of the Employment Agency. As a rule, the plan must not only be much more complex, but also more precise. After all, the financier wants to know to whom and, above all, for what purpose he is providing the start-up financing, as it represents a high risk for him, such as a company insolvency.

For a convincing business plan for start-up financing, a precise description of the start-up project is essential. Take particular care to include meaningful figures. This allows the best conclusions to be drawn about the expected profitability.

A bankable business plan for successful start-up financing

Over the years, a standard structure for the business plan for start-up financing has been established. After the cover sheet, the financier can first obtain a rough overview by reading the summary. Then comes the company profile and a detailed description of the business idea. The fourth important point is the market and the industry environment. On the basis of this, the financial institution can get a more precise picture of the current market situation. Marketing is then explained on the following pages. Finally, this also contributes to the success or failure of your business idea and thus to the risk of the start-up financing.

Now your potential investor already knows the most important basic information. The question he now faces, however, is: How do you want to put your business idea into practice? Therefore, point six of the business plan for start-up financing also deals with the practical implementation of your idea. The next point then deals with the organisation of the company, followed by the opportunities and risks arising from your start-up – they play a particularly important role in start-up financing. Here you should be particularly realistic. Every industry and every business field involves certain risks. In some cases, the banker will also be aware of them. If these are not in the business plan, he will certainly have certain doubts.

Last but not least, your business plan must of course include your financial planning. This point is possibly the most important aspect for the bank. What about your current credit rating? What investments will you make? What role does the targeted start-up financing play? You should also discuss the question of fixed costs in detail in this point.

This is how you convince in a credit discussion with the bank

The business plan is usually handed over during a personal credit discussion with the bank. Since there is probably hardly any time left for him to study the plan in detail, it is up to you to convince the banker of a start-up financing.

The banker would of course like to receive competent answers to his questions, which are also in line with the content of the business plan. At the same time, however, he also wants to get a personal impression of you. It is therefore interesting if you prepare a short presentation for your meeting with the bank, in which you present each chapter of the business plan clearly and as concisely as possible.

In doing so, try to pay particular attention to the benefits for the customer. Data on the existing market is also important here:

  • Market size
  • Market potential
  • future market development

When discussing a loan with the bank, also look at the competition analysis. It is essential that you have suitable answers to the questions of how strong the competition is and who the main competitors are. Furthermore, you should also discuss your goals and strategies and once again examine your financial plan in a comprehensible and, above all, realistic manner.

Conclusion on start-up financing

The possibilities for obtaining start-up financing are manifold. Nevertheless, comprehensive preparation for the discussion with the bank, a meaningful business plan and a self-confident, competent appearance are mandatory. After all, you want to obtain start-up financing from a credit institution that does not (yet) know you and your business idea and therefore sees a certain risk in the granting of money.