Tip

Delivering successful bank pitches

Your main bank is one of your most important business partners, as it plays a key role in providing cash to your company. However, the relationship between a bank and its corporate clients has changed in recent years. In this context, it is important that you adjust to today’s requirements and take care of your relationship with your main bank. Our tips will offer you a good foundation for doing this.

Credit check

The bank will conduct a credit check to analyse whether you and your project offer sufficient assurance in respect of proper repayment and fulfilment of obligations.

a) Personal credit rating

Your personal credit rating is deemed relevant if you have earned trust based on your reliability, professional and technical qualifications, and your entrepreneurial abilities. Don’t put a foot wrong: chargebacks, excessive indebtedness, or non-compliance with payment obligations are knockout criteria for credit allocation. As well as your personal reliability, which is rated based on your previous banking relationships (including credit information), your technical and commercial skills are also important. Only a qualified entrepreneur is a good borrower. Therefore, you should always radiate personal creditworthiness. This also includes knowing your company’s strengths and weaknesses, explaining developments, and being able to demonstrate design possibilities. Knowledge of your own financial limits and the current banking conditions are also relevant here.
Another important component of the credit check is an evaluation of the industry that includes its problems and future development opportunities. For this reason, you should thoroughly research general economic and industry development. Particularly if you are a founder of a new business, it is important that you explain to the bank your involvement with the planned project. Make an impressive impact by means of a serious demeanour, articulate and clear expression, openness and a sense of purpose.

b) Material (economic) creditworthiness

In future your solvency or creditworthiness will to a greater extent be reviewed by means of a standardised and objective rating. The purpose of this is to ensure that your project achieves sufficient surplus revenue to meet the credit instalments to be repaid.
The checking of your ability to make interest payments is at the core of every credit assessment by banks. For founders of new companies, the financial section of the business plan should particularly focus on this. The target figure required by the bank is not solely the operating income – rather, the decisive parameter for assessing a company’s earning power is its cash flow. Cash flow is determined by adding write-downs to the operating income. To determine the repayment threshold, the bank will deduct the income tax amount, extraordinary expenses, and any private withdrawals to fund personal living expenses from the cash flow.

Required documents

To ensure go into the bank pitch well-prepared you should have your documents ready, or even better, submit them to your bank before the pitch. The more complete the documents, the more quickly the bank can make its decision.
You should submit the following documents:
  • Business plan with a well-thought-out business strategy and forecast figures for sales, liquidity, investments and personnel
  • Annual accounts
  • Business analyses
  • Possible securities
The bank will also usually need the following additional documents:
  • Commercial register extracts (for registered companies)
  • In the case of shareholders, also the articles of association
  • Proof of own funds: this is a list of your personal assets and your personal debts; if your bank wants to use a mortgage as credit insurance, you should be able to document the ownership situation (land registry entry, purchase contract) and the value of the real estate
  • Commitment to obtaining a bank reference if you are starting a new banking relationship

Future planning: it’s not just the past that counts – the future is also crucial.

In particular, you should provide your future plans in both words (company strategy) and numbers (business plan and forecast figures). Ultimately, the bank does not need to assess whether you were able to meet your obligations in the past, but whether you will be able to do so in future.
You can use a strategy sheet to convince your main bank of the viability of your company. In this document, you should:
  • develop a mission statement;
  • spell out your competitive advantages and entrepreneurial approach;
  • set out your core expertise and allocation of your operational resources;
  • and state your strategic goals and actions.

Proactively shaping the relationship with your bank

It is advisable to maintain open communication with banks. Give your bank an overview once a year, for example when submitting your statements of financial position, even if you do not currently intend to take up any new loans. Analyse the past year’s business progress for your bank. Even if you have not reached your target goals in the past year, this gives you an opportunity to prove your entrepreneurial spirit to your bank by developing new strategies for the next year. Remember: nothing is more damaging to your banking relationship than your bank discovering that you have withheld unwelcome information.
It is also recommended that you find out about funding options in advance of your discussion with your bank. Our chamber of commerce offers extensive information and advice on this matter.

Securities

Loans are a matter of trust. However, merely trusting that you will pay back the loan as agreed is not enough to justify the granting of credit. Arranging security, or collateral, constitutes a kind of guarantee function for the bank. The following questions are always critical to the bank:
  • Is the security being offered satisfactory and sufficient?
  • Can the security be easily agreed and easily monitored?
  • Can the security be disposed of quickly and without difficulties?
If you do not have adequate securities of a type that is customary in banking practice, Bürgschaftsbank Hamburg GmbH can help you with a deficiency guarantee.

Planning the negotiating date

Make a negotiation appointment with the banks at an early stage and do not agree a time beyond the close of your business partner’s working day, as this often results in a less detailed discussion. Of course, you should also take sufficient time. Make notes about important points of the discussion. There is also nothing wrong with taking an advisor with you.
Be understanding about the banks’ justified requests for securities. That said, you should refuse to provide securities that seem excessive. Ask about all components of the terms and conditions. Put forward an effective interest rate and explain what considerations went into the calculation.
If your loan application is refused, ask for the precise reasons why. After all, that is the only way to identify the weak points in your concept and then build in counterarguments.

The ten commandments of a bank pitch

  1. You should make a convenient appointment with plenty of notice and take sufficient time for the pitch (arrive for your agreed appointment on time!).
  2. You should find out what documents your bank needs and submit them to your bank in good time before the pitch. If you have your own securities, you should have corresponding proofs to hand.
  3. Find out whether your bank has specialists for your project. Many banks have specific points of contact for start-up projects in particular (simply take a look at the bank’s website).
  4. Find out in advance about any public funding programmes that might be suitable for your project, so that you can also request these funds in the discussion. You should also find out about the bank’s current terms and conditions, and compare what is offered by different credit institutions.
  5. You should underline your expertise without exaggerating it. Being knowledgeable about the current economic situation, industry development and future trends emphasises your entrepreneurial capabilities.
  6. Do not present yourself as a supplicant. Your project and the allocation of credit are also in the bank’s interest.
  7. You should make the bank aware of the strengths and weaknesses of your investment project, be familiar with possible objections to your project, and demonstrate solutions.
  8. At no time in the conversation should you convey a sense that you are not equipped to face the situation. If questions arise that you cannot answer on the spot (there will always be some of these), explain how you will find out the answer to them.
  9. Address the bank advisor’s objections with coherent arguments. 
  10. Be well-versed in your numbers! You must have the sales figures, cost situation and derivation of these numbers in your head.
Tip for closing the meeting: Briefly summarise the discussion and ask when you can expect to receive feedback. If your request is refused, ask for the reasons. Use this feedback to inform a discussion with another bank.

Questions you should absolutely have a (good) answer for

  • What is the purpose of your company?
  • Are you seeking to close a gap in the market with it?
  • Do you have competitors and how do you set yourself apart from them?
  • If no competitors can be identified: why do you have no competitors?
  • What does the market look like overall and what are the trends for the future?
  • Why did you decide on this location?
  • What level of investment do you need?
  • How much capital do you need for fixed-asset investments and the required working capital?
  • How high will ongoing costs be?
  • How will you finance these investments?
  • What self-funding is also available to you?
  • Which public loans and bank loans have you considered?
  • What securities do you have available?
  • What sales and revenue do you expect, and how do you justify these figures?
  • What industry comparison figures are available to you?
  • Can you afford interest and repayments?
  • How many staff members do you need and how much will personnel costs be?
  • What employment law provisions and requirements do you need to comply with?