How To Access Funding For Your Business
How To Access Funding For Your Business
How To Access Funding For Your Business
When recently asked "if you needed to access funding for your business what would be your preferred method of finance?" 37% answered bank loan, 19% overdraft, 19% government grant, 12% private investor, 9% invoice finance and 4% asset finance. Bank finance still ranks high although an interesting comment on the banking side is that 25% less businesses are now asking for borrowing and of those that did ask they asked for 25% less.
Private equity ranked higher than perhaps would have been the case a few years ago. This has no doubt been fuelled by TV programmes such as "Dragons Den" and "The Apprentice" and leads us to believe businesses are seeking to grow. It could, however, reflect an impression that the banks are not open for business in the current climate. In reality even if equity investment is available, and there are certainly still angels out there if the proposition stacks up, it is usually used in conjunction with bank finance.
Government grants are rated highly although data may be distorted by a belief this includes the Enterprise Finance Guarantee Scheme ("EFG") which as it requires repayment should more accurately be accounted for as a loan rather than a grant.
Most importantly you must get the right type of finance for your needs and in the words of the NatWest chairman of Small Business remember a lender "kind of needs the money back at some stage" which is a fair point!
Banks need more information now than they did when the markets were much stronger and funds were more freely available. They need to know the "what ifs" so they can see what would happen to your business in a downturn. They are not the only ones that need this information as it is crucial you know the scenarios under which your business would be in difficulty. You yourself need comfort in terms of your headroom not just the bank. Having attended an accounting event recently I was surprised to hear that some accountants were still advising their clients to be cautious about giving "nosey" bankers too much information. I guess you need to ask yourself the question "How can they help you if you work against them?" As with any relationship it has to work both ways so if you have a great bank manager (or accountant for that matter) hold onto them.
Top tips to access funding from your bank
Approach your bank early.
Be clear on what your business actually does now and what it wants to do.
Be clear on what the borrowing request is actually for.
Get the right product that meets your needs.
Get the amount right by using a believable cash flow forecast.
Tell the bank how you will repay them, again using a cash flow forecast.
A forecast Profit and Loss Account and Balance Sheet should also be produced.
Downside scenarios should be run in terms of sales, profits and debtor days as a minimum.
Demonstrate your track record with (audited) accounts, management accounts and aged debtor and creditor lists. This may also need to be backed up by personal asset and liability statements.
10. If you have no track record credibility can be boosted by employing/consulting experienced personnel to work with you.
11. Be open don't leave any skeletons in your closet they will be found.
12. First impressions count so get it right first time.
As a follow up,
Do not put your cash flow away once the facility is agreed. Use a rolling forecast to track actual results and manage peaks and troughs. This can then be built on for long term strategic plans.
Continue dialogue with your relationship manager at least once a month if not more often.
Follow these simple tips to help you access funding and obtain the support you need to move your business forward.
Search over Thousands of Businesses in a US Business Directory Konica Minolta Di2010 / Di2010f – Customizable Business Level Copy Machine Choosing A Business Contract Hire Van Facebook Marketing Strategy - How It Works and Drive Traffic and Business Successful Business Uses For Facebook How To Make Extra Cash Fast For The Holidays Gather Fans! (Of Your Online Business) Can Facebook Pages Really Work For Your Business? Ten Substantial Ways Your Business Could Stand to Benefit by Accepting Credit Cards The Top Seven Reasons Why Your Business May Experience Profound Benefits by Accepting Credit Cards Watch Baylor Bears vs Texas A&M Aggies Online Why Google Is Important for Local Businesses IRS Fines Unsuspecting Business Owner Millions