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Borrowing at the Bank

Have you ever wondered what the mystery is about borrowing money. Down at the bank. Maybe it's because we have no idea exactly how the bank determines whether you get the loan. Maybe it's just the fear of the unknown. Then we listen to country music they always mention how Merle Haggert's daddy could borrow money just on his name. Down at the bank

Hi, this is KC Truby from the high plains of Wyoming...the coldest place in America but that's ok, because "I look good in blue"... this is one of the rare places where it snows sideways. The state tree is a phone pole, and it's so dry here most of the time, our water is only wet on one side. A lot of folks ask why I live here... that's easy; no one else wants to.

I stopped at a filling station the other day. There was a sign on the door. It said "don't ask us for information. If we knew anything do you think we'd be living here." Sometimes when the wind is blowing just right, and there are no clouds we can watch TV and I'll see the ads about how the banker is helping the small businessman line up special financing, just by stopping in "down at the bank." I wish the guy that does those commercials was the same one approving my loan.

If you're like most small business owners, it generally seems that getting money out of the bank is like the old Silver City dentist pulling out a tooth that had gone bad. The old dentist would slap some salve on your gums and stand on your chest with a pair of pliers. Yank, until that gnarly tooth came loose. That's an ugly picture of making a withdrawal. Of course, in Western history there are other ways of getting money out of a bank.

About 45 miles north of our place up here in Wyoming there's a quite valley, the south fork of the Powder River runs through it and if you've got a four wheel drive, or a horse with new pair of steel shoes on him, you get up into this valley. When you get here you'll find the remains of a national headquarters, right along the river. These national headquarters are now just a couple of log cabins left to rot in the Wyoming winters but at one time belonged to Bob and Scott, two of the most famous people in American history for getting money out of the bank. As Paul Harvey would say.... Here's the rest of the story.

Our famous Wyoming bankers called their national headquarters from which they ran a successful operation for withdrawing money "The hole in the wall" and old Bob and Scott were better known as Butch Cassidy and the Sundance Kid. It's fun to go up there. It's a peaceful place now, but I'll bet it was exciting a hundred years ago. Of course, there's a footnote to all this. Their expertise at getting money out of the bank ended up in most of the gang getting hung, and our famous entrepreneurs got themselves shot in South America. Not much of a future in running a business that way. So, let's look at how we can get financing for our business with out a noose attached to the loan papers.

The number one reason we don't do things is that we're a little apprehensive. Most often we're afraid of dealing with the bank, because we don't know what they want or how to present our request. So, I'll let you in on a secret. Here is what the banker is going to ask you. Right off the horse. He wants to know....

  1. How much money do you need?
  2. How long do you need it?
  3. What are you going to do with it?
  4. How are you going to repay it?
  5. What will you do if you don't get the loan?

Now, how did I choose this topic? Well, I'm going through it. I've got a big project in the chutes for next year. My wife would like to open a bookstore and coffee shop up here in Casper, so she is going to need some financing. I figured that we can open the place with about $75,000 in inventory, $25,000 in fixtures, $20,000 in operating capital, and another $25,000 in up front advertising to get it off the ground. Anybody who would start a business without an advertising budget committed up front, is plum nuts to think they're going to make it. The hardest thing to get in business is a customer. If you don't have a way to bring in the buyers, you don't need to waste your time with the fixtures and the inventory. Now, I can get about half the inventory on trade credit. But that means I'll need around 90,000 to get this place open. I'm willing to put up a third of that plus I've got the initial operating capital tucked away in a CD that's coming up. So, with cowboy hat in hand, I'm gonna look for a bank to finance $60,000 towards this future emporium of the printed word.

The first rule of successfully dealing with a bank, is DON'T WAIT until you need the money. Line it up in advance. We're planning on opening this bookstore in the spring of next year, some 8 months away. But if I wait until APRIL I sure might be in for some sad surprises. Can you imagine spending the next 8 months on the groundwork for this bookstore, and then finding out that you can't get it off the ground for lack of financing. Wouldn't that be a pretty big waste of 8 months of work? Instead, we're going to line up the financing first, then I'll get a location, and then I'll get the inventory ordered, and plan the store layout, build the fixtures and write the advertising.

The financing is the most critical point of opening this new business since I can't do anything without the money. Why do anything at all until you have the money lined up. Now this "Down at the bank" article is NOT JUST geared to start-ups. What I'd like to do here is help you work with your banker for emergency lines of credits, inventory financing, expansion funds, and other money needs. Let's figure out how to develop a relationship with a bank and then expand on that relationship so that when you need funding, it's there.

I'm a big believer in planning ahead. If a business owner waits until they run out of customers, to star