How To Sign Louisiana Banking Letter Of Intent

How to industry sign banking louisiana letter of intent

I'll Taylor it a little bit for one of audience today again my name is mike tantito and i am the president CEO of the UH period Industrial Development Foundation and also the iperion Economic Development Authority so I have a very interesting bio spent 13 years in the banking industry doing business consumer corporate lending all types of mouths for all the types of businesses worked on business plans and things like that so it's a significant time in the back of the banking industry and we've over to the economic development realm about 10 years ago little less than 10 years ago down some flaws but it's been an interesting mix of and it's extending very fulfilling for me if you have that financial background and now to understand over the years business development how businesses start from an idea or concept and how really hard it is for for people to get financing and to to get the resources that are necessary to make that happen so I want to talking with you today a little bit about that immediate paper version of my gender you're welcome so much so let's just talk a little bit about a bang banking relationship how important it really is that's the topic of our conversation today bang on it and before we get started I really want to thank you and be proud of us and his hard-working crew for doing this summit this is a great topic and I know there are many other sessions that you'll see and I think that they all think you get a very much this particular session is about how you can we build a relationship what you think I mean you can get the resources that you need and you know how you can get the proper business plan in order to make it out so let's talk about the business concept for just a moment can you score if you have a dream not here these I'm going to turn to that create our idea of vision into reality something that makes money right so I'm sure you learn about that a little bit new classes you have an idea a concept you think it might be innovative we think it might be unique you think you might be able to provide that to public and you think you know what maybe they might even buy it I might be able to make some money by doing it so all of those dreams are great but to communicate and turn that concept from a dream into a reality as a completely dif is a completely different story and so we're going to talk a little bit about how we turn a move it your vision into a successful business and the first thing the first step is to go beyond that a vision you think you know what if I made that widget or if I opened up an ice cream shop for if I provided a particular service that's my dream maybe that's something that you enjoy it's hockey maybe it's something up action of yours that you want to turn into a reality and you want to turn you know set it up the way to make a profit well that's the vision so now we're going to talk about how to go beyond that especially your resources so you're going to need the resources that are talking about perhaps you need financing the form of loans you need a line of credit you need someone to invest in you you need that is startup capital to get going I said I would say the same thing goes for businesses who are past the start of the base and we want to move forward to the next stage of growth in their business you need the right five minutes you might want to let's say you're an existing business and you have a fleet of ten trucks that provide those services for your business your vision might be I want to get to third insurance or I'm going to get to 40 trucks well you still have to have that loan of that line of credit for that relationship to take you to that next level so whether you're just starting out and it's just that idea or whether you were a business that's ready to take you to that next level these concepts are very important for you as we go so the problem is that get those resources Genesis they need there's nobody there with a check ready to sign okay it's hard to get the money it's hard to get the cabin it's hard to get the resources to get started and we're going to talk a little bit about how we can make that happen for you where can I get the resources of that necessary well you might be able to get it from family you might be able to get it from friends you might even be able to get it from investors but maybe you can do that but remember and this is a one of three different reality checks that we'll talk about today ninety percent nationwide ninety percent for start-up businesses fail that's according to Forbes manual ninety percent of people who want to move into a startup business that concept fails to make the case for resources to any potential funding source you have to in order to make that case you have to have a rock-solid well thought out an honest business plan you have any honest with yourself this isn't about selling so I am a concept then we give you money it's about planning properly and being honest with yourself so that your numbers are truth that's going to be the key to moving forward with this business plan I would submit the most difficult ever going to get auto oil resources is through a bank so out all of those resources then talk about asking your relatives for money finding it find out an investor find an adventure calculon's all of those things are great in angel investor things of that nature all of those things are great but the most difficult I would submit the most difficult place to get money is from a bank why because they scrutinize the business plan so much more these guys are on 10 ladies want to know everything everything about you everything about your concept everything about the numbers that back up what you have because they want to make sure that when they make that decision that you can be able to pay back with it with Avenger it's not not amazed because it takes thorough review and evidence and the phone numbers to properly evaluate whether you can pay that virtual so no matter what sources you ultimately see your resources from it's logical to me that you should prepare yourself for the most difficult arena you should prepare as if you want to make yourself and making yourself bankable ensures that every other resource that you have will accept your numbers and understand the concept because if you're bankable that means you did your homework this is the football analogy if we prepare if you prepare our planning to win against the best teams you're much more likely to win against the easier things so the best teams and that the most difficult teams won't you need to prepare for and so I submit it fair for a bank you can a do really much more successful with other teams as well therefore having a plan that bankable is a must so how do we get there when reality check number two mangas know that eighty percent of all businesses fail and that's according to Bloomberg magazine so we said before ninety percent of startups fail eighty percent of all businesses fail okay so so sorry so what if we stacked up against some odds here right you want to be part of that ten percent of startups that succeed and then twenty percent of all businesses that last and become successful and make the profit that you're looking i we make that happen when banks know that you're likely to fail you've been walking in your Baker and you're talking about verily division and the things that you the things that you want to do and then that bankers mind he's thinking yeah but you gotta eight percent chance and this is going to go down in flames so how can you sell somebody or are you how do you push the concept forward and a lot going to be part of that eighty percent I'm going to be part of that twenty percent that actually succeed the way you do that is about building relationships in translating your vision dream or idea into the language of bank because here's his what i mean by language of bankers you walk in you have a passion you want to talk about a particular service that you want to do your banker really doesn't care about your passion your banker almost really doesn't care about how you feel about power or service might be he just really cared it's something that it's fun fun for you to do that you could get up and do that every day and it be enjoyable with the banker cares about is that you're going to make enough money to pay your shoe back pure and simple and so you have to learn how to express that passion in that vision in the language of numbers cash flow net profit now you know expenses definites credits inventory right you know all the stuff that people are going to talk about thinking about their passion you've got to learn how to translate that passion into the language of banking it's going to make it much much easier for you when you seek that financing example most ideas are new innovative most successful ideas or new and innovative but that doesn't mean that the banker shares the same dish he or she wants to see the numbers and wants to know the jerk what your idea can produce and whether or not it can produce what we claim it can produce in other words he wants to make sure that you can produce the results in terms of numbers the way you say you can mr. Bagga I can't wait to get this business started a passion passionate about it when you get up every day and I'm going to work hard and I think people out there really want to buy what I sell the bankers going to say sure great pitch now you can see the numbers that back then and after you got work you want to build your relationship with a banker with I've seen the five seas of a character a person's character there the borrower's reputation in the community do they have a reputation of doing what maybe for you do they have a good reputation in the business community the second C is capacity what is the borrower's ability to repay do you have money you have the capacity to make the kind of money that you're talking about to pay that money back the debate lynching the third C is calculated can the borrower contribute to this own kalki can the barber who contribute his own capital because the more capital a borrower will contribute the better chances he or she will not default that your unity in you if you need a hug if you need ten thousand dollars to get your business story if you go to the bank earning you asking for ten thousand dollars you have a no skin in the game but if you put up one hundred bucks a thousand bucks two thousand bucks of your own money now you're asking Bank for eight thousand dollars and nine thousand dollars to get that business started he knows that you've got some skin in the game if you default on that loan or if you could fall upon that finance you lost some of your own he didn't have to take all the risk you had the capacity to participate in the risk that makes it more likely that he'll lend you the money the fourth C is collaborative does the ball or have a property or large assets that can be put up to help secure the money so if you walk in and you say mr. banker I need ten thousand dollars to start my business I'd like to borrow ten thousand dollars please he's going to say well you know it just never look good be at least have something that you can secure with a house or something like that no I don't have any collateral I just want you to take all the risk you're going to put yourself in a position to be less likely to be approved that financing but if you have some collapse something that you can put up some assets that can back up that loan the more the more likely you are that he'll prove them and of course the 50 is conditioned on the conditions right is the interest rate or the amount of principal right to finance the horrible so let's just say i'll use my ice cream shop analogy let's say that you come into the bank can you say mr. banker I'd like to open up an ice cream shop in my in my community the manor is going to look at the community and say you know what there aren't any of our ice cream shops in if you may say there aren't any other ice cream shops in my community so I think you follow but I thought it would be very successful the bankers gonna say I wonder why there aren't any other Bank ice cream shops in this community now oh that's a wonderful idea it's more it's going to be more along the lines of I wonder why nobody else there's gotta be some reasons why an ice cream shop hasn't been successful here in the past so let me explore and look at those things more on the other side you may say this the bank I want to open up an ice cream shop and their attend that other ice cream shops in the community already you're going to say wow I mean you know ten of those can be successful unless top I think I'll be successful to that bankers going to look at the condition can say on there too many ice cream shops are ready and can this mean you'll survive as well so you got to make the banker wants to make sure that the conditions of the loan request that you're making are going to be something that makes sense that he or she thinks you're going to be able to get to the profits back to pay back that loan if we keep these five season my character capacity capital collateral and conditions and present a good case based on those five CDs that we naturally improve more chances to get resources that we need so a good relationship with your banker and a well-thought-out honest business plan that describes your vision or dream and a format that the banker needs will position you and I for greater success in our in our in our business plan so here's some tips for building a relationship with you better one go in and need your banker will and have any funding ask don't just walk in and say hi like for ten thousand dollars please okay go in and be just like you would go to meet anyone way ahead in effect now do you think you're going to start this business in a year or two from now now's the time we go in and and just introduce yourself tell them a little bit about moving more learn a little bit about him get comfortable McKenna because in the long run you're going to have a very very close relationship with that banker and so the best time to do it is before the funding asked even happened you could also discuss your future ideas and get a sense of what the Baker is personally all about and the general policies of the bank you may go to a bank that's more aggressive than ours something is all based one with but some things might be more aggressive than others some bankers might be hungry or for your loan than others and so as you begin to them to uh to build a relationship with this person before you ask any money you're going to get a sense of is this one of those proactive aggressive bankers or bank or banks that really want to lend me money or do I get the sense that baby that just not so hungry because they've got enough business already and maybe I need to build a relationship with a different bank somewhere else before I ask for those photos ask you then you can also ask your banker once you begin to build that relationship to create a 51 and periodically break in a personal financial statement so before you ask for any before you ask for a loan periodically we drop by your bankers office with personal financial statement that's may be filled out on the banks approved for and you just drop it by it and say at some point in the future I'm going to come and ask you for money but not today today I just wanted to give you a copy of my personal financial statement that you can keep in 25 it shows the vanator that you want to show him time to stop running and ask for a loan and run out it's showing you over time and I can sustain the proper finance finances to be a good customer for you when I come in and ask to this moment so bankers I think would really be impressed with you if you came in from time to time and said here's my personal financial snapshot see you again in a couple of months a couple of months later here's another snapshot on a personal financial situation he begins to build a fire when you begin to open up a relationship you begin to talk about finances and at that point you might feel more comfortable to then start going in and talk about talking about your ideas on what you're passionate about because you'd be done with you because you think that they might work you also might want to visit with your CPA if you don't have a CPA while you're starting up a business you need to find a qualified certified public accountant that can work with you as part of your team you need to visit with your CPA and do your homework to arm yourself with Anand with the honest numbers of the things that you might need you do what's called the needs assessment so as you're beginning to think about your business plan you started this relationship with the banker now during the phase where you talk where you're thinking about your own needs assessment if I open this business if I start up this business what's what kind of salary is am I going to need to pay what kind of insurance costs if I'm gonna need you pay what kind of rare am I going to need to pay what kind of kind of expenses in life and I honestly have so should i do know that I think that don't need to ask for that ten thousand dollars maybe I could do it with a thousand dollars or I do the ten thousand dollars but based upon an honest assessment I really need fifteen thousand dollars you need to do your homework and you need to work with your CPA to make sure that those numbers are right and communicate that with your baby can now understand this your CPA in your banker might be looking at your numbers from opposing points of view if you think about it most CPAs are hired and they work with your numbers and they approach it from the point of view of showing as little income as possible to reduce the taxes that you might have to pay right so when you have to turn in your financial all the numbers are correct but the approachable many of them approach it from the point of view of what can I do for my client to show as little income as possible to reduce the amount of taxes my client might have to pay the banker on the other hand approaches it from the completely opposite point of view the banker wants to see all of your income he wants to make sure that you have the best possible income picture to be able to pay these loans back so sometimes a good tax position is not a good income positive position and so the banking angle and the accounting angle might conflict and so you need to make or that your CPA understands that hey I'm taking these returns I'm taking these numbers and a regular to my banker so then we need to make sure that we're showing them the picture in the way the command to see it that makes it ok so now I'm going to now begun to build your relationship with that banker he knows who you are you know who he is he realized that the Jew the real do you not just somebody coming in off the street asking for money and now it's time to ask performance when it's time to move here either is forward it's time to translate your vision into two numbers back to the five seeds when it's time to make me ask you need to be honest with yourself and you need to be honest with the banker on your application you need to create an a roadmap that you can discuss with your vein use the open after the numbers when I say a roadmap let me bring in spreadsheets letters of intent or examples of other successful successful ventures of this time when you go in for the ass so it's Richie let's talk about that when you go into the attic and you sit with your bed and you talk about your plans over the next two or three years because a start-up is considered to be a business that's younger than two years old it helps to have a spreadsheet a month by month month spreadsheet of though of what you think you're going to do both on the income side and on the expense side there are many places like the Louisiana small business center here ul-lafayette we also do it in our office where's where we can offer you an electronic face exhale based spreadsheet where we load your numbers and if it will spread them out before your month by month over the next 30 years if you change your life if you want to adjust something you can change the number and it will be spread it out based upon your new numbers those kind of that is a really good road map it gives Thank or a real good understanding of what you think you might need to do month to month the month to be successful so i will bring those Frenchie's letters of intent very helpful so let's say that you go in and you say I want to provide this service in my business okay if you bring letters of intent for the people who receive those services who say hey if company if you lend the money to to company X and he opens his business then I in this letter will tell you that I intend to buy this many widgets from him or I intend to use his service dis often and you bring in a number of those letters of the 10 that way the banker knows on day one when I opened the business when he opens the business he's already got customers lined up he's already got the potential in the first two months to get good cash flow looking so letters of intent are very about important as well you might also what drove out great examples of other successful businesses like you that are not in your area so if you're in lafayette you want to open up a particular service company might go on the internet and find other places around the country in areas of a similar size who have similar services and maybe show some articles will show some examples of why they were successful doing it because it helps back your vision it it helps the bait or feel a little bit more comfortable with the risk that you're going to be asking them to take understand that the final outcome of your financial apps may require land resources working together to achieve you need so we talked a little bit about family friends angel investors banks venture capitalists you know sometimes people think it's going to the bank and ask them for everything well as I mentioned before they want to make sure that you put your but they also it also better positions you if you have a number of different funding sources spread the risk among them and asking for less for less for me so maybe you have an angel investors if you put twenty five percent of what you need maybe you have a venture capitalist if you press another twenty-five percent of me then maybe only have to ask the bank for the other fifty percent of what you need if you can put these things together in a way that helps spread the risk you're going to make your financial asset as much more that that much more important understand that the Vega will be working within the policies of the bank and the laws that govern lending so naturally there are federal laws that govern how banks work with you fair lending practices how they can use credit bureaus and credit reports to make sure that they're treating you fairly those are the laws that your banks have to have to have to operate but they also have their own policy okay so they may only agree to lend you a maximum of fifty percent of what you're asking for not because of the maker wouldn't want to do more but because that's the policies of the bank so you need to understand that there are some some rules and some regulations that the Baker is going to be operating under when he makes this decision so my message to use to understand that by that's successful and on financing is the result of well thought-out and honest business planning realistic goals and partners like banks that understand your vision bottle numbers not just by the pretty pictures and not by your passion but by the numbers that back up with your vision shows and it doesn't end there after you reach your goal of initial funding it's important to continue to involve your banking partner whether you're seeking additional funds or not because and this is the third reality yet by working to be valuable you exponentially improve your chances of financing success regard on regardless of your funding source that's from Inked Magazine so I point to you today is as you move forward with your dream your vision your idea and you take that vision dream where I need it and move it toward an actual business you need to take your passion and your drive but you need to learn and work very hard to convert that to the numbers that speak the language you pay if you're good enough for a bay you're going to be good enough for other funding sources as well I do want to open up a little bit of time for questions and answers that you might have on my message to you today is be banking humana keable you'll have a successful so much more successful business plan yes sir why it sounds as if a key ingredient to getting financing is to have a well thought out in a well drawn out of business plan do you have any suggestions on resources that people can seek out as far as may be consulting organizations groups are even banks themselves that give advice on how to prepare business plan would exactly in a business plan they look for when determining whether or not they're going to take on a certain projects absolutely great question so there many ways that you can find the template for a business plan it's sometimes it's a suing simple as googling how to power right of appeal and there are many templates out there a lot of different organizations a lot of different nonprofits who specialize and helping startups get ready can can give you a lot of different templates that's one place to start another place you might think oh is the Small Business Development Center there are four small business development centers all over the state there's one here located at you will laugh yet a ver a great resource those folks that have business planning tools and they have templates and things that you can fill in as well I would start frankly I will start with that banking relationship you know I go into my banker and I'd say look I'm going to be looking at a business venture here soon I'm not here to ask for money today but I like to kind of get your insight on the kind of things that you want to see in a business plan you know some of the business plans are having me on describing it describing your passion and subscribe on your vision that's all to it that's good but what the bank Roman wants to see is the numbers and so based upon who you're working with they're going to tell it I need to seek the numbers in this this format of that for me so if you go on do too and you get the standard template stuff you might not be known as number seven teams you need to be so i hope i hope i'm answering the question that the first place to start is with you banker and then there are services like the small business development centers more than happy to help you and we in a very imperil all of our office offers those services as well we have a small business adviser we work very closely with small business development centers you can make a local appointment and we can walk you through the business planning process never pressure to argue to the first place it's not like that's good question it's not like it's not like short thing right you know see you know you're not rolling in front of the banker and pitching them an idea and it tells you that you love to do it echo stuff it's more along the lines of going in and building a personal relationship with your banker before you even ask for a loan this is before you even go in you introduce yourself I just wanted to come by have an account at this Bank wanted you to learn move it about me I want to learn a little bit about you i'm thinking maybe at some point in the future I may come back you visit earlier but I want to get a good feel for your bank what you're all about and you know you focus on small business lending large business lending you know what's the philosophies of this Bank you begin to build a friendly relationship with your Manor right so much from then or weeks from that or whenever it's time for you to go back you even use from it whenever it's time for you to go back and make that actually today I need to ask you for money that banker feels comfortable with you they know that you're the real deal they know that it's not just about you and your vision it's about you actually have a concept that can be successful and now you are showing him he or she the numbers to prove that it can be successful that it can cash flow that it's make enough of a profit to be able to pay that back it's a process a lot of people want to just jump right in you know two people tell me they just looking phone book and see the nearest bank and run in and expect if you alone I would submit to you that it is a long-term process before you get that first the first financing if you make the preparations like the senator gentleman was talking about with the Small Business Development Center and putting together a well-thought-out business plan you're going to make yourself much more likely to ultimately any of the questions I have certainly enjoyed speaking with you today we're going to put up a presentation on my video did work today we're going to put up a video presentation on the innovative acadian website it will also be available and iberia is that work which is the iberian national development foundation's website I'm 32 Vorg my name is mike tarantino and if you have follow-up questions I'll be happy to help you today also if you'd like to give my office a call you can call anytime my office number is 3 37 36 708 34 and I'd be happy to discuss these concepts in more detail with you good luck on your business venture and let me know if I can be of assistance in the future you