For most startups to develop, they have to borrow money to support their growth requirements. But not every startup has a chance of getting that money. Some get it and misuse it, one of the reasons most startups fail – poor financial management.
There are multiple factors people or companies consider before giving out a loan to a particular individual or project. And the entrepreneur Patrick Bitature, also chairman Simba Group of Companies, outlines some of these factors in this article.
He delivered the message through a video uploaded on YouTube in which he was responding to a question, ‘How do u(sic) convince someone to give u (sic) million dollar loans?’ posted by a one Iqbal Kamali on social media.
According to Patrick Bitature, when you go a lender seeking for a loan, the key things they consider are personality and the organizational structure of the business you are borrowing the money for.
The lender will seek to find out what kind of team you are working with; for instance, if you have managers, auditors, sales teams, legal personnel among other people needed to ensure that the money borrowed will be productive.
“… you the person behind the business; what kind of person are you? Are you the person of integrity? Are you the person who sticks to their word? You deliver on what you say. Are you a person full of hot air? You overpromise and underdeliver!” he said.
“If you say I’m going to take it into gambling because I know how to read cards and numbers, that’s still high risk. You’ve got to have a track record of what you’ve done in the past.”
See also: Nataliey Bitature: How to stay on top of your game as an entrepreneur
On personality, Bitature explains that you have to prove to the lender that you don’t have a bad track record with people around you. You must also present a formidable proposal, demonstrating that you’ve clearly thought through the plan of action.
Banks look at your balance sheet or your banking statement before lending you money, he says, adding: “lending is a function of how you’ve operated.
“… the first time I went to borrow a million dollars I was scared, in fact, the bank was keen to give it to me because I had a good track record. But I was scared and my wife was even more scared, [saying] don’t take it. And we were investing in property, tangible assets. And we thought we had got them at a very good price; we knew we could rent them out and pay back the money. And so, that’s how I began.”
For those intending to borrow money, he advises that you should start by borrowing a small amount and pay it back so that you build trust before someone offers to lend you a ton of money.
“First of all, if you can’t get a million shillings from somebody, you’ll never get a million dollars from that person,” he says.
“So, I think let’s start small – you start by convincing them … to convince someone to give you their money, to invest in you, you’ve to have a track record — a)that you can protect their money to make sure it’s safe and give it back to them, that’s the first thing, I’ll not lose your money; 2) I’ll grow your money, we’re going to make a profit.”
In conclusion, Bitature says that acquiring a loan should be done after getting grounded in financial literacy so that you are prepared to face off with the likely temptations and challenges.
“So, I urge you, don’t be scared to take a loan but don’t take a loan without financial literacy; you need to know what you are doing and you need to have the discipline, the character, the strength to know that this is working capital, never touch working capital, never mix it up with money for spending, that’s important,” he said.
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