Need business funding? How to maximise your chances of success

Need Business Funding

Need business funding? How to maximise your chances of success

Are you looking to take your business to the next stage, to grow and evolve? At key stages of its development, most companies will find that they need business funding. Having the appropriate finance in place to allow you to achieve your goals and maximise your chances of success is critical. Finance is the elixir of business and without it even the best businesses can fail to reach their full potential. Here we look at how to present your business to a potential funder to maximise your chances of success.

Need business funding? Research your options

There is a plethora of financing options available to businesses  each with its own target market. The internet will give you a wealth of information and guidance on how to choose a suitable option, but if you are in any doubt then independent corporate finance brokers are available to help guide you through this often complex marketplace.

One thing remains the same however – regardless of which business funding option you chose you need to get your business into shape in order to maximise your chances of securing the finance deal you want. Imagine trying to sell your house having not tidied it for months. Business funders won’t invest their time and efforts in your business if it looks like you haven’t done so yourself.

Prepare a narrative about your business

Whatever you need business funding for, you must show that your company is well managed and has a successful future ahead of it. The application process is your chance to showcase your business. How you are making it a success and why you believe someone should support you in doing so.

An external party is not privileged to the wealth of information that you know about your business, and so when a funding application lands on their desk they need to know where to start – some context in which the rest of the application can be viewed.

Therefore you should have a clear and informative narrative prepared. This narrative can be either written and included with the initial application or verbally when in dialogue with the potential funder. Be forthcoming with information, both good and bad. Any funding decision can only be made based on the information that has been presented – if something is important it should be discussed and not shied away from. Once the scene has been set you can get into the detail of your business’s finances.

Provide clear and thorough financial information

When a business is looking to raise external finance, especially if it is for the first time, there is a seismic change in the expectations of its stakeholders. There will be an expectation that your business accounts are completely understandable. On the balance sheet what are the major assets? Are there any that are not related to the core business? What are the major liabilities? On the profit and loss account what the trading trends? What is happening to costs, including the money that directors are paying themselves?

To manage the process of putting together clear and thorough financials is to manage the perceived risk in the business. Securing business funding (and the price at which it will be provided) is all about risk, and risk is a result of one thing; uncertainty. When a lender looks at a set of financial information it wants clarity – a certainty stemming simply from understanding exactly what the numbers are showing.

Before giving your application to a potential business funder look at it with fresh eyes (or ask for the review of a colleague). How clear is it? Will a layman understand what they are looking at? Or will they respond with a list of questions that you thought too obvious to require clarification?

Stay up to date

Small businesses have historically struggled to get timely financial information, with some studies suggesting accounts of UK small business are on average four months out of date. These delays were understandable in the days of handwritten ledgers but in the age of electronic (and increasingly online) accounting packages such delays are hard to justify. It may even represent lethargy on the part of the business owner, and offer a telling signal of the importance a business places on its finances.

In the fast paced world of small businesses a lot can change in a month, so if a funder is looking at 4 month old accounts, he/she is likely to include such a risk factor in their assessment that few will applicants will pass even the first stage of the application.

As a guide we would suggest that your management accounts are not more than 8 weeks out of date. You can reasonably assume it taking 6 weeks up to a maximum of 2 months to produce a solid set of management accounts, so a potential funder would a risk factor to the assessment if your financials are more than 2 months old. You should also keep rough headline numbers on a near real time basis – sales, net profit and bank balance.

Be on hand to meet with potential funders

Most applications for business finance will involve a face to face meeting or at the very least, a phone conversation. This is a chance for a funder to see the business in operation and to meet the key people involved in it. If you need business funding, you must make sure that the key people in your business are available to meet or talk with the funder.

An initial visit or call from a potential funder will be wide ranging and aside from general business discussions may well pick up on some of the aspects of the formal application, whether seeking clarity, confirming assumptions or simply connecting the dots. In addition to being available, be prepared.

Know your numbers

We’ve all watched Dragons Den and seen budding business people collapse under even the simplest of financial interrogation and judgingly said ‘Will they never learn?’ so don’t let this be you.

Here we come back to the issue of uncertainty and the resulting risk. Know your numbers – we do not expect all businesspeople to be accountants but a good grasp of the numbers is vital. If you believe you are out of your depth talking through accounts, especially if there are any complex or technical aspects, then enlist the help of your accountant, whether they are internal to the business or external.

First impressions count – Be open, honest and professional

Applications range hugely but there is a commonality to those accepted – a clear, concise summary of a strong business. First impressions matter so the upfront presentation of a well prepared application will both set the tone for a positive outcome and save significant time in the rest of the due diligence process. Be conscious that if you enter into a relationship after concealing information that could be perceived to be material to the initial assessment then it could have serious consequences in the future. One thing should never be underestimated – the benefits to the business itself of going through a full, critical and reflective self appraisal.

Responsible business borrowing can often be the smartest option for your business. Obtaining funds to support growth, supplement working capital and enhance your processes is a fundamental to growth-focused financial strategy. If you operate a based business registered in the UK that is profitable and has a capital base of at least  £200k, apply here for Pay4’s revolving credit facility. Ideal for growing businesses.

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