Optimism is a quality that’s admirable in an entrepreneur, but if you’re too optimistic, your banker may get the sense that you don’t understand the risks inherent to your business.
Bankers undoubtedly understand that there’s no business venture with zero risk, so address potential risks within your business plan or during an interview. If you’re not up front about these issues, lenders may not feel confident that you have any contingency plans in place to deal with unforeseen circumstances or major risks.
Remember that bankers will definitely be realistic about their chances for recovering their loan if your business begins to fail, so you should also acknowledge and consider these possibilities.
According to SCORE, a realistic business plan should accurately reflect your personal abilities, recognize that industry and market changes require flexibility, and that you’re not overly optimistic about the business assumptions you make.
Make sure that your business plan is reasonable, and is appropriately scaled to the funding you expect. If your “reach exceeds your grasp,” it may be wise to confine your business operations to a certain region or sub-segment of your market and then grow your business later after you’ve generated significant cash flow.
