Starter loans: how to succeed

So you want to get a loan for your new business? Winning over the bankmanager will not be as easy as you might think
ELAINE GREEN

Selling big money: the window dressing may look good, but landing a bank loan is no walkover
IF YOU are a non-Greek with little capital of your own and minimal experience of running your own business prior to arrival in Greece, then the chances of landing a loan from a local bank to fund your dream cafe by the sea may be as remote as its location. However, if you have a large chunk of your own cash to invest, a business plan that comprises more than a few notes on the back of your travel itinerary and some former experience in the industry of your choice, then you can start printing your menus.
Loukas Lagaras, manager of Alpha Bank's small business division explains the questions that your banker will ask. "We want to know if you have previous entrepreneurial experience. It need not necessarily be of running your own business, but you should have work experience - ideally in the industry of your choice. We are also looking for evidence that you have researched the market. If your business is a restaurant or something similar, then we are not looking for reams of written material for your plan - just evidence you have thought it through," he said encouragingly.
Bankers will ask lots of personal questions, particularly about your finances, so be prepared to lay everything out in the open. "We want to see your financial capacity," Lagaras adds. "We will also want to know what your fallback position is."
Asked if this means one has to be prepared to put a domestic property or similar asset up as assurance, Lagaras replied that this was not necessarily the case, but the bank will want to know how it would get the money back if the enterprise fails. He stressed that if the loan was modest - perhaps the business person putting up 70 percent and asking for the other 30 percent as a loan, then the bank would not need such a strong fallback position as the risk would be considerably smaller.
"We judge it on a case-by-case basis," he said. Personal details such as age, marital status, previous jobs and numerous other personal issues are examined. Your past loan history will also be assessed. So, if you have defaulted on a loan in another country, be aware that the news may have reached the professional debt assessors here.

Warning to Aussies

An executive from Piraeus Bank was less welcoming to non-Greeks. "You don't have to be Greek," he said, "but we prefer that the person has established a business here first for, say, three years before coming to us for a loan. If you are talking about some Australian straight off the plane with no cash, then forget it."
Put to him that it was a "chicken and egg" situation - many people need the cash to get started - the executive replied that a non-Greek "will find it difficult to get a loan for a startup - the risk is big for the bank. I don't say that we would exclude it, but even for Greeks, startup loans are difficult. You must have a good percentage of your own cash to invest first," the executive added.
There is also the risk that banks perceive of a foreigner as leaving the country and defaulting on a loan. Piraeus prefers to see a three-year business plan.
Less direct, but perhaps not dissimilar beneath the surface, is EFG Eurobank. Along with many of its peers, it offers tailor-made products and loans of up to 2.5 million euros for small businesses. Like Alpha, EFG prides itself on the use of Small and Medium Enterprises (SME) experts at local offices who "build a close relationship with you and learn about your needs by discussing them with you... in order to facilitate your business plans," an EFG official says. Such banks also offer what Alpha's Lagaras describes as "informal business counselling to help your success".
EFG's website boasts: "We are next to you day by day, in every way you choose, in order to help you enhance your profit and reduce operational expenses." Naturally, it is in the bank's interest to support you in making a success of your business so that its repayments can be made on time, perhaps the business will grow and bigger loans will follow.

Types of loans

Most banks in Greece offer two to three broad types of loans.
* Credit lines
These are basically overdraft facilities. They are used to help with operating expenses such as salaries. Other forms of loans are not given for operating expenses.
* Tangible assets
These would include fixed items such as computer or printing equipment, office furniture and so on. They are usually available on either fixed or floating rates.
* Real-estate loans
These are similar to a domestic mortgage on property, although rates are normally marginally higher compared to the domestic market, due to the higher risk element.
Tips
Athens News research on SME loans among the big five banks in Greece makes it evident that success in gaining extra cash - and paying it back - will be more certain if you follow these simple tips.
1. Research your market well. Try to be innovative. Is your business idea going to fill an unmet demand?
2. Know the competition. As one banker put it, "If you are opening the 11th shoestore in Pangrati and there are already ten in the vicinity, then the chances of failure in your enterprise are high. Needless to say, such a proposition would not attract a bank loan. Draw up a chart, map or list showing the competitors in your sector or locality and indicate where you will position your enterprise within this.
3. Don't make aggressive steps. Start in a small way to test the market.
4. Have a development plan that includes a financial "break-even analysis" - indicating which year of business you expect to move into profits following the initial startup period. Get help from a professional accountant.
5. Have a fallback position in case something goes wrong. Is there a parallel product or service you could easily switch to if your idea flops?
6. Don't get in over your head. As one banker put it, "Be aware you have to pay your loan back. It may seem an obvious point, but if you are over-exposed then you will have trouble repaying your loan. Debt will help you maximise your equity - but it is effectively not your money, so don't ask for debt levels your business can't afford."

ATHENS NEWS , 08/09/2006, page: A16
Article code: C13199A161