Entrepreneurship. Entrepreneurs, don’t lie to your banker after a failure

Of the more than 50,000 entrepreneurs experiencing judicial liquidation each year in France, most will not embark on a new entrepreneurial adventure or are lowering their ambitions within the framework of a new project. This phenomenon is symptomatic of the way we view failure in our country. We are indeed witnessing a strong stigmatization of the entrepreneurs concerned: suppliers, customers and civil society distance themselves from those who are marked with the seal of failure. This discrimination hinders their access to the financial resources necessary to bring new projects to life. Several studies, including ours thus describe a reluctance of banking players to finance an entrepreneur who has experienced failure, especially in their establishment.

Despite the weight of social and banking standards, some entrepreneurs who have experienced failure nevertheless manage to relaunch a business and convince a banker to support them. In this case, they obtain the opening of an account and, above all, the granting of a loan (often limited amounts). As we indicated in this article Studies have shown that credit institutions sometimes go beyond the first glance at an unhappy past experience.

The relational analysis of access to financing opens two avenues for entrepreneurs. On the one hand, they must move towards a bank capable of overcoming the stigma of entrepreneurial failure. On the other hand, they must take on the role of “rebounder”, through a project and communication on this new business capable of winning the banker’s confidence.

Beyond the financial guarantees that the manager can provide (e.g.: contribution, guarantee, other sources of income, BPI insurance), the quality of the relationship with the bank advisor is paramount. This point is all the more crucial in relations with VSEs, which rarely have the opportunity to provide transparent and structured information to report on their activity. The resulting information asymmetries have long sounded the death knell for relations between the banker and the entrepreneur in difficulty.. Some rebounding entrepreneurs have, however, been able to create the necessary conditions to create a climate of trust with the banker. In[researchpublishedin2023inthe[recherchepubliéeen2023danslaInterdisciplinary Journal, Management, Man & Business, we thus seek to identify the keys to successful post-entrepreneurial failure storytelling in the French context. The article gives entrepreneurs the keys to communicating with their bankers in order to overcome the difficulties they have previously experienced.

This study is based on interviews with 15 bankers, from 10 different establishments, and 11 entrepreneurs. We also sought the expertise of a consultant specializing in business financing, who developed an innovative system within the 60 000 Rebonds association – the “envol” course – aimed at facilitating connection between entrepreneurs who have went through a judicial liquidation and banking professionals.

Our research reveals that business managers are more or less understanding when faced with a request for financing following an entrepreneurial failure depending on their background (their training, experience, skills, etc.) and their kindness. What arouses particular interest, however, beyond the personal traits of bankers, is the way in which trust can be established when initiating a business relationship.

Being honest pays

Despite the repeal of indicators 040 and 050 of the Banque de France, business managers are always able to easily obtain information on the history of judicial liquidation of an entrepreneur. This data is actually accessible by various means, such as simple searches on Google, consulting the removal of companies from the trade and companies register via the site society.comaccess to the Infogreffe database, or even obtaining a KBis extract issued by the commercial court registry.

Unfortunately, some entrepreneurs ignore this reality and try to hide their liquidation, in the hope of making the best possible impression with their bank advisor (others even go so far as to use a nominee). However, to benefit from a second chance, the manager must demonstrate honesty and address, from the start of the relationship, his or her previous professional failure. A lack of transparency on this subject thus proves prohibitive, compromising the establishment of an essential basis of trust between the banker and his professional client.

Furthermore, hiding one’s past means forbidding one to show one’s ability to bounce back. Indeed, the business manager is concerned with how the entrepreneur emerged from his past failure with his previous banking partner. More precisely, what catches his attention is that the entrepreneur has managed to honor his financial commitments. The fact of having cleared one’s liabilities and closed one’s company “properly” is interpreted as a crucial indicator of honesty. The idea that the entrepreneur could redo with them what he has already done previously with a colleague is very present among bankers.

In order to assess the professional competence of the entrepreneur in the targeted field, the business manager also engages in in-depth questioning aimed at understanding the origins of his liquidation. By analyzing the explanations provided, the advisor attributes the failure to internal or external causes. If the entrepreneur manages to demonstrate that his setback results from external circumstances, such as unpaid customer debt, unfavorable economic conditions, the health crisis, a natural disaster, the departure of a partner, employee fraud or a work accident. life, the banker will not question his technical skills and his management capacity. In this case, he will be more inclined to give the entrepreneur a second chance.

Provide tangible evidence

Although the banker can be reassured by the identification of external causes justifying the failure, he still expects from his interlocutor a capacity for self-criticism, rather than systematically positioning himself as a victim, whether of a accountant, a previous banker, an associate or bad luck, among others. Furthermore, the business manager expects the entrepreneur to have learned lessons from his judicial liquidation, for example by resizing his project or improving his preparation (in-depth analysis of the market and customer needs, realistic assessment of necessary resources, etc.), or by seeking external support. With this in mind, the advisor seeks to understand the concrete actions that the prospect has taken to develop his skills and avoid repeating the same mistakes. It is particularly interested in initiatives such as ongoing training, the acquisition of additional experience in the sector of activity, or even the hiring of a person with expertise that the entrepreneur himself does not master. not. The idea that the entrepreneur has learned lessons from his failure, transforming his liquidation into a positive experience, must therefore go beyond the stage of a simple cliché and be based on tangible evidence.

Our research ultimately allows us to better understand how an entrepreneur faced with failure in the past can reassure a business manager when entering into a relationship. Maintaining the flame requires going further than a simple communication veneer. Banking commitment necessarily raises the question of learning and the posture adopted by the entrepreneur with regard to his journey. Ultimately, a controlled narration of the judicial liquidation by the manager helps to dispel the spontaneous prejudices of the bank advisor, such as the stereotype “who has drunk, will drink”, and to relegate his past disappointment to the background. Of course, validation of the financing file by the hierarchy is in no way guaranteed, but a well-developed story encourages the business manager to defend the loan request, by presenting solid arguments to his superiors. In all cases, it is obvious that successful post-failure storytelling constitutes a real lever for entrepreneurial emancipation.