Introduction
Starting a business involves more than just a unique idea and registration. You will need access to finances at various phases of your firm. For example, cash is required to undertake a market survey, capital is required for product development; and after the product is ready, a sales staff must be hired to market it in the target area. But the question is, how will you arrange funds?
If you aim to achieve your funding requirements by bootstrapping, you might have limited resources in comparison to the huge market, and if you fail, you might deplete your hard-earned savings. If you seek to obtain funds through bank loans, you should be aware that lenders do not lend to startups due to the risk associated and a lack of credit history.
The last and most viable alternative is to raise cash from venture capitalists and angel investors. However, you will need a solid business loan pitch to obtain capital from investors.
This article will guide you on how to nail business loan pitch.
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Guide to crafting a compelling loan pitch
The secret ingredient to creating a winning loan proposal is a pitch deck and building a persuasive loan presentation. Let’s understand both.
Pitch deck
It is a cluster of slides with information related to your business and its various components, like target customers, product features, introduction to the core management team, and annual turnover.
Presentation
A solid business financing presentation requires preparation. Practice the investor-friendly loan pitch in front of a mirror every day for a few days, and any questions you believe an investor might ask, write them down right away and prepare an impressive answer to them.
Tips for Creating Successful Pitches
Here are some additional tips for pitching for business funding:
1. Follow the 10/20/30 rule
Startups typically face the problem of how long the deck should be while preparing for an effective loan proposal. That is where the 10/20/30 rule of thumb suggested by Guy Kawasaki, a renowned entrepreneur and investor, kicks in.
It means that your pitch should have 10 slides, last 20 minutes, and employ a font size of 30 points. This will help you focus on the essential information and avoid overwhelming the lenders with too much data.
2. Start with an elevator pitch
An elevator pitch is a crisp and catchy summary of your business idea and plan that you can present in 30 seconds or less. It should answer the questions: What do you do, who do you do it for, and why do you do it better than others?
Starting with an elevator gives investors a brief idea of what you will discuss. If it is creative, it will immediately grab the investors’ attention and make them interested in your business.
3. Tell a customer story
Storytelling is an art. Try to show the value of your product or services by telling a story of how it helped a real customer. You can use a case study, a testimonial, or a video to demonstrate how your business solved a problem, satisfied a need, or improved a situation for a customer.
This will help you establish trustworthiness and confidence with the lenders and show them the impact of your business.
4. Keep it conversational
A business loan pitch is not a lecture but a conversation. Always involve the lenders in questions, feedback, and dialogue, making them feel like they are a part of your journey. When discussing your product with someone in a different domain, always pause after explaining a few features and ask whether they understand what you are saying.
Keep your pitch casual, but add personality and humour to make it memorable and engaging.
5. Show your Business Model
A business model demonstrates business viability. It illustrates how your company creates, delivers, and captures value. Talk about your various revenue streams and customer segments. Explain the cost structure in such a way that investors realise that you are keeping costs under control rather than spending blindly.
Talk about your key resources, sales channel, and value proposition. Your presentation must also explain how you will scale and sustain your business.
Also Read: Scaling Your Side Business: Strategies for Growth
6. Showcase your experience
Even if your product slightly lacks that wow factor, investors can still bet on you if they trust your skill, knowledge, and expertise to run the business successfully.
Showcase your experience and achievements in your field, and highlight any awards, recognitions, or partnerships you have received or established. The pitch should reflect your passion and commitment to your business and why you are the best person to lead it.
7. Financial projection presentation
No pitch is complete without talking about numbers. That is why presenting a financial plan is a must. Besides your product, investors are more interested in understanding how much sales and profit your business has churned. Prepare well-organised financial projections that can give the investor an idea of whether you have the potential to repay the borrowed sum.
Your financials should generally include a balance sheet, income statement, break-even analysis, and cash flow statement. To help them understand this projection, discuss the assumptions and scenarios you used while preparing it.
8. Talk about the competition
Another strategy for loan approval is highlighting the competition. Competitor analysis is critical for developing a market capture strategy as well as attracting investors. While pitching your product, discuss how it is superior to your competition and what gap you are attempting to fill where others are falling behind.
For example, if you are an e-commerce platform, you directly compete with Amazon. In this scenario, if your product offers same-day delivery in a remote place, no convenience fees, and a no-questions-asked return policy, you can highlight all of this to attract funds.
9. Talk about your team
Assume you are an investor, and respond whether you will support a company with a team that has never sold a product and has no expertise in managing a project. Maybe not. Even if you support them, most of your funds will go towards their training rather than product improvement or expansion.
So, if you have a team of specialists from other fields, talk about them and the value they have brought or will bring to the table instead of being self-centred. Discuss your team’s culture and demonstrate how you recruit and retain talent.
10. Stay clear on your requirements
Lenders want to see that you have a clear and specific request for the loan. Be clear on what you want and how you will use the loan. Also, show that you have explored other funding sources and have a backup plan in case the loan is not approved.
Also Read: Investing Profits from Side Ventures
Conclusion
A business loan pitch is a presentation that showcases your business idea, plan, and potential to the lenders. It is a crucial step in securing a business loan, as it can make or break your chances of getting approved.
The loan pitch best practices include preparing a pitch deck, practising your presentation skills, and following the above-discussed tips for creating a successful loan application strategy. To learn more about financial concepts, stay tuned to Stockgro!
