The prospect of needing to secure finance is something that many businesses throughout the UK will be au fait with, whether it’s to fund an acquisition or to finance an investment.

However, given the challenges the economy currently faces, identifying and locking in the right deal is becoming increasingly difficult.

If a business hasn’t sought out finance for a while or if there has been a significant change to their operations since they last applied for funding, then there are a few things they should consider to improve their chances of success.

Review your business plan

A business plan is often one of the first documents that a potential lender and/or investor will want to see as, if compiled properly, it should clearly lay out your vision for the future of your company.

An up-to-date document will show financiers that you have taken time to map out a path to profitability and growth, giving them the assurance they need to invest the sum you require.

If your business plan is overdue an appraisal, consider undertaking this sooner rather than later and be sure to highlight potential future risks, as well as opportunities.

Investors or lenders respect transparency as it makes it easier to determine the benefits and shortcomings of any deal.

Provide figures that back you up

As well as having an effective business plan, businesses will need to be able to demonstrate that they can service the regular repayments of any loans that they make or offer the right level of return to investors.

A key aspect of this is demonstrating financial health and positive cash flow. Although not essential, it is highly recommended that you produce comprehensive management accounts in the months prior to seeking finance.

This should validate profitability, cash flow, debts and sales. Doing this over a period of several months will give a lender or investor confidence that the business is stable and sustainable.

It also shows that you, as the business owner, are in control of your finances and business performance, giving you credibility. Would you go in to The Dragon’s Den without knowing your margins or how much money you actually need to fulfil your plans?

Be realistic

Be sure that you are borrowing as much as you need, and not severely over-or-underestimating your funding requirements.

Lenders will want to check the value of the investment you are financing, and alarm bells could ring if you appear to be borrowing too little or, equally, if you are borrowing far too much.

Both may indicate that you are taking on too much additional risk, which could affect your ability to make repayments.

Prepare for due diligence

Anticipate financial and legal due diligence at some point during the process and be aware that deals aren’t guaranteed until the lender is completely satisfied with the conditions of lending.

Remember, lenders and investors tend to be risk-averse. If they feel that something uncovered during due diligence should have been revealed to them sooner it can put them off entirely.

Try alternative finance

If you can’t get a loan from a traditional lender or you are struggling to find investors that will finance you, then you may want to consider an alternative form of funding. There are a growing number of alternative finance options available.

If you need money in the short term, for example, you could use invoice finance. This allows a lender to effectively ‘purchase’ your unpaid invoices for a fee. Then, when the invoice is paid by the customer, you get the remaining balance minus the fee.

If you need to borrow a larger sum then you could borrow against your existing assets or property owned by the business. This could help you secure a larger sum over a longer period but may put the assets you own at risk.

Finally, crowdfunding and peer-to-peer lending are options too and can be popular among new entrepreneurs. This approach allows businesses to seek financial support from a number of individuals, who ultimately share the risk, and is often ‘online’.

Typically, investors will be offered a small percentage of equity in the company in the case of crowdfunding or will see numerous lenders loaning money and earning interest on repayments.

How can George Hay help?

Possibly one of the most important steps you can take is to seek advice from an experienced expert. They can help you to find the best deal and assist you with preparing the information that lenders and investors need, including detailed and bespoke management accounts – brokering the best outcomes for you and your business.

To talk to us about how our professionals in Cambridgeshire, Bedfordshire and Hertfordshire could support you, contact us today.

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