What do you think, do banks actually care about your financial projections, or do they just assume they are wrong?
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- I spent more than 30 years in the commercial banking space, primarily serving the needs of entrepreneurial clients.
I would argue that projections are given credence relative to the experience of the bank with that particular client. If the business is new to the bank or a young company, then the projections are less likely to be heavily weighted than those provided by a longstanding company that has had a multi-year relationship with that same bank.
The degree to which new assumptions are required to support the proposed new debt will also weigh on the depth of analysis given during the underwriting process.
As a borrower it is imperative to develop a relationship with a commercial bank that understands your business at more than a superficial level - you should be challenged by the tough but relevant questions that are asked of your current operations and the challenges and opportunities upon which you've based your projections.
Simply obtaining a loan from a bank that doesn't do its homework can later become a recipe for financial disaster when markets change and the business's performance fails to meet with the bank's expectations.
Choosing a bank is an important strategic decision that merits considerable forethought.Feb 6, 2013
- Wow, Bruce summed it up quite well.Feb 7, 2013
- Thanks!Feb 7, 2013