There’s little doubt that the market for raising finance changed considerably during the summer of 2008 and SMEs in particular have found it more difficult than ever to access finance over the last 5 years.
The economy is now significantly improved (and is forecast to continue to do so), levels of confidence are higher and banks are once again setting their managers targets for new lending and increasing support to SME marketplace. However, despite these improvements, business owners cannot assume that accessing the finance that is needed by many to keep pace with growth is going to get markedly easier.
So, how do SME owners give themselves the best possible chance of success when applying for finance and funding?
Here are 5 key tips:
1. Be Realistic
Is the amount of finance you are applying for realistic and sensible in relation to the needs of the business and the risk to the lender? Put yourself in the lender’s position – would you lend this amount of your own money to your business? Asking yourself this question first may mean it is time for a thorough review which may show that the model of your business does not need the levels of funding you believed – it may need more, less or even none! If you would not lend your own money, how solid is the business and/or the business plan?
2. Be Truthful and Honest
If you or your directors have any skeletons in your cupboard be up front about them. Banks will find out about previous failed companies, CCJs etc. during their due diligence so there’s no point trying to hide any adverse information. Not disclosing a material fact can destroy your credibility and this is a critical component of the application and of the view taken by those that will approve it. If the business case for funding is strong then most lenders will take a reasonable view of prior adverse disclosed information.
3. Expect to give personal guarantees
Prepare a statement of your assets and liabilities to demonstrate you have the personal means to back this up. You will need to demonstrate both the ability to service the borrowing and the willingness to pay it back by guaranteeing the borrowing. By doing this you are showing that you have some “skin in the game”.
4. Seek and take expert advice
Get an experienced expert to help you prepare a robust, powerful and flexible Business Plan that will highlight the strengths of your business and help mitigate any risks. Businesses that have a powerful business plan more than double their chances of success. And don’t buy advice on price – you get what you pay for in this regard and free advice from “anyone” can sometimes be very costly! It is also vital that you are actively involved in the preparation of your plan and do not abdicate its creation. Developing your own plan with the involvement of an expert in business (not just accounting) and reviewing it with them is the best and most successful route to achieving the business results you are looking for.
5. Allow enough time to prepare well
A funding application that is rushed through is not likely to be well prepared and highly unlikely to succeed. Remember the saying “you never get a second chance to make a good first impression” so always prepare thoroughly, always plan far enough ahead to enable you to better forecast the need for funding and you will increase your chances of success.
Pro-actions have a track record of helping small business raise finance…contact us to today for an initial free discussion to see how we can help you!