VCs might give you money before you’re profitable

VCs might give you money before you’re profitable

But banks don’t play that game.

If they are even going to THINK about giving you a loan, it’s because:

– You ARE profitable
– You HAVE BEEN consistently profitable
– You likely WILL BE profitable in the future
– And you are SUBSTANTIALLY profitable with good margins

Otherwise, they’re not going to risk it.

There is some nuance to this though.

I was once looking at 2 oil field servicing companies that both wanted loans.

Company #1 was:

– Established
– Had lots of equity
– Concentrated on a few customers
– Wasn’t winning many new contracts
– And margins were getting tighter with time

Their history looked great. Their present looked good. But their future looked scary.

So even though they had lots of equity and proven success, they weren’t a great loan candidate.

Company #2 was:

– Only a few years old
– Didn’t have much equity
– Was winning new contracts
– Had a great management team
– And had steadily growing margins

They didn’t have much history to go off of, but their present situation looked good and their future prospects were great!

So despite not having much proven success, they made a great loan candidate.

Profitability isn’t just a static number, it’s a trajectory.

Digging deep on banks is what I do.

🔔 Follow Brian on Linkedin: Brian Pillmore




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