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About Face. Business Loans In A Hostile Environment.

May 11, 2009

Breaking news for business owners looking for financing for their growing companies. 

A recent Economist article reports on a research study by Rice University suggests that a person's creditworthiness may be seen in their face.  For years physiognomy - the idea that a person's face is a reflection of their character - was sneered at.  Now, it appears, it is making a comeback.

The study focused on 6,800 loan applications on web loan site Prosper.com, which allows individuals and small businesses to raise money from many individual investors.  Pictures of loan applicants were rated for creditworthiness, and showed a strong correlation with borrowers' credit ratings.  People flagged as untrustworthy were also less likely to be offered a loan by Prosper investors.  The survey did not reveal which facial features label someone as untrustworthy, but rumor has it that Equifax is now funding a major research study.

Scary news unless you know the right way to approach business funding.

1. Learn the language – do you understand your balance sheet, know your ratios and growth rates, can you talk about gross and net profit and understand the contribution of your various products to profitability? Or do you at least have a senior advisor who can assist you?

2. Have a presentation prepared. Banks want to see if you are a clear thinker and good credit risk.

3. Timely and Accurate Financials - you must demonstrate the capability to produce meaningful numbers on time.

4. Show them the money. Have you and other investors already opened your wallet?

5. Have complete mastery over the numbers. You really must. You must be prepared to justify every single assumption.

6. Present a range of scenarios. You need to demonstrate that even in the worst case; the bank will get its money back.

7. Have a clear vision for the business which extends beyond the life of the loan or overdraft. Banks are more likely to lend to you if you can demonstrate you can have a good commercial relationship with them over a long period of time.

8. Make sure you are not asking them for equity funding. It must be debt funding. You must be able to provide them with a high level of comfort that they are not taking a risk.

9. If possible have an accountant or a competent finance person with you. A B2B CFO® has over twenty five years experience and  they can help you plan and prepare for funding and make sure your financial house is in order.

10. Plastic Surgeon - if all else fails get a referral to a good facial plastic surgeon.

 For more information on face-saving ways to improve profitablity and the value of your business contact David Kirkup, Partner at B2B CFO, on 770 845 6897 or dkirkup@b2bcfo.com.


More from David Kirkup…

About the Author

David has over two and a half decades of business experience and is a proven financial management expert. Working in Europe and the USA, David has served as Divisional CFO at a number of Fortune 500 corporations: including Reuters, Marsh & McClennan, Zurich Insurance and ADP as well as numerous small and mid size companies. As part owner of a small software company, he was heavily involved in the marketing efforts and ultimate sale of the company. As CFO with a national PEO firm he dealt with the credit and financial issues facing hundreds of small business clients. David also spent 5 years in Bermuda managing captive insurance companies.

View David’s Personal Website


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