Raising finance to support your business can be a fraught experience. First impressions count and a solid business plan with a robust set of forecasts gets you on the front foot in funder discussions. That said, not all plans are suitable for the high street banks, hence the emergence of a far more fragmented funding landscape over the past decade. This evolving market can be a confusing one, so obtaining commercial and rounded advice to help you identify the right funder for your business is critical to achieving your plans.
Understand your options
Securing funding can be a complex task that requires time and an understanding of the myriad options available to your business. Banks will support those businesses with solid plans and a strong track record, but they obviously cannot agree to every request, regardless of how commercial it may be. If your bank declines your funding request, do not be deterred – there are more options available in the market then ever before and that puts businesses in a strong position. Speaking to an advisor who can help you to understand what’s out there could make all the difference between securing the package you need and not having the funding in place to be able to put your ambitious plans into motion.
Engage with advisors
Do not fall into the trap of trying to do everything yourself. Taking advice and talking through your growth plans with your trusted advisor will not only challenge your thinking, it will give you the additional resource you need to allow you to remain focused on the business throughout the funding process, from initial planning to securing the funding.
Be armed with solid information
It is probably fair to say that whilst most businesses will at some time in their lives have prepared a business plan, fewer take time to update this regularly to reflect the current state of play in the business and the wider market. Make sure any business plan you intend to use as the founding of your funding discussions looks at the opportunities in the market, that it identifies your competitive advantage (and how you will exploit this) and that it clearly articulates your plans for the future. The same is to be said when you are pulling together your forecasts – make sure the assumptions are realistic and that you have demonstrated you have made provision for the failures as well as the successes. For instance, if you’re recruiting sales staff, then not all of your new team members will be star performers. Funders will be keen to see cash headroom, so make sure the forecasts are easy to understand and fully integrated between profit & loss, balance sheet and cashflow – another key area where the right advisors can make this process a much more straightforward and productive one.
It is important for all parties to communicate openly and keep in touch throughout the process. Funders tend not to appreciate surprises. If you encounter a problem or things change, speak to your advisor and bring it to their attention early. You’re more likely to find a solution if you are able to work together. If not, and the news gets buried until later in the day, it can become an ultimatum with a high chance the funder will walk away.
Remember – the cheapest deal is not always the best
Don’t automatically accept the first offer, Make sure that, with the help if your advisor, you should around to allow you to not only understand all the options that are available, but that once you have decided on the best route, you secure the more favourable terms for you and your business. Consider the balance between providing a personal guarantee or paying slightly higher interest rates and not being personally liable. you will also need to review financial covenants carefully, making sure you understand them in the context of your growth plans to ensure they will not restrict your business.
If you secure similar packages from different providers, consider which of the personnel you would prefer to work with. Most funders will be looking for a long term relationship with you so it is important that you are comfortable with your assigned team and that you feel they will bring real commercial value to your business. As your growth plans become the reality, you will need all the support you can get from your close circle of advisors!
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