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Cosmin Baiu: 3 parts or a team for financing activities

I would like to begin this editorial with a conclusion based on personal experiences and confirmed through all the discussions I’ve had with top entrepreneurs: Poor communication with a financier can lead to the loss of a project with potential. Therefore, the priority should be the project that requires funding (credit, leasing, etc).

It is important to understand that in over 95% of cases, the entrepreneur does not come into direct contact with the decision-maker, and as such, we need to outline a strategy in this regard. In practice, if the decision-making department does not receive a complete picture of the project through the documents and information provided by the front office, the chances of obtaining funding decrease significantly.

Have you encountered situations where some banks approve a project while others do not? Have you wondered why this happens? Is it due to stricter or more relaxed risk policies? No. It depends on how the commercial representative of the financier understood the project and presented it further. Ideally, a business plan for a project in need of funding should be built or at least refined with the help of the commercial representative of the financial institution, so that the analysis committee understands the project’s true potential, and approval chances are maximized.

Practically, the success of the contract and the project depends on how the financing dossier is constructed. Let us not forget that the credit committee has a limited time at their disposal. Let’s do an exercise and imagine that this committee is listening to a story. If the story is well-detailed and well-argued, with fewer unanswered questions, the chances of it being well-received are very high. If the story has many unknowns and raises numerous questions, the common decision will be that the financial institution faces many risks – hence, the approval chances are lower. I know, the entrepreneur has (at least in theory) all the solutions and answers. Well, the applicant does not participate in that decision-making meeting.

In other words, if the project’s story is well-presented, with both strengths and weaknesses considered – there are no projects without risks – the chances of securing financing are very high.

It is also essential to know that those who make up the committee have extensive experience and are familiar with many situations similar to the project under discussion.

I’ll make another statement from experience – there are many businesspeople who do not truly understand the financial aspect of their business. I say this because this is where projects are often presented summarily and interpreted differently by the entrepreneur, financial director, and financier.

What is the solution? When you have to purchase real estate or something very important and valuable, you turn to a consultant or a real estate company, even if it incurs apparent additional costs. In fact, it’s about risk mitigation and making the acquisition align with your needs. In the same way, I believe we should turn to independent advisors who are not affiliated with the financing institution or the applicant’s financial department but understand all three parties. I said three parties because that’s how it is in reality – the entrepreneur, the financier, and the accountant/financial director of the applicant. Each of them has different perspectives based on the same financial and operational information. From here, it is easy to understand what the recipe for success is.

Cosmin Baiu, Credit Projects Advisor

About the author:

Cosmin Baiu is one of the most accomplished young executive managers in the Romanian market, with an impressive career that combines the financial sector – corporate banking, the public sector – state guarantees, and the industrial sector – his latest position being Deputy General Director of Romania’s largest industrial complex, Chimcomplex SA.

He is the author of some of the most widely-read volumes on financial analysis, anti-fraud, and management in Romania, including: “Financial Analysis Made Simple,” volumes 1 and 2, Evrika Publishing 2018 and 2019; “Manager or Impostor,” Evrika Publishing 2020; “Entrepreneur in Difficulty… Seeking Financing!” Evrika Publishing 2020.

A graduate of a French Executive MBA program, Cosmin Baiu can support your business in multiple ways: Investment project analysis, parameterization, and business plan drafting, both for new investments and working capital raising; Representation in dealings with financial institutions to secure financing; Financial analysis of the company/financial diagnosis; Specialized financial analysis courses, organized upon request, within the available time.

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