Lending

Why resilience is key to raising finance successfully for your firm

Marcelino Castrillo | 28 August 2015 | 9 years ago

If you ask a bank for a business loan,  the first port of call is making sure accounts are up to date.
If you ask a bank for a business loan, the first port of call is making sure accounts are up to date.
As there are now more ways than ever to raise funding, NatWest‘sets out what you need to consider before taking the plunge, and why being tenacious could make all the difference.

If you’ve reached the stage where the business needs a boost to take it to the next level, there are several initial points to keep in mind. Make sure your accounts are up to date, build up a solid network of contacts and fundamentally, focus on where your expertise lies.

With those ticked off, you may be wondering how to find the investment needed whether it be for recruiting a crucial new employee or launching a new product. The first obvious consideration is the banks and they are a popular option the British Bankers’ Association noted stronger lending to medium-sized enterprises and a higher number of loans approved for small businesses at the start of 2015. In 2014, 29.2bn of new SME borrowing was approved which marked a nine per cent increase on 2013.

So, the banks are definitely an option, but before rushing ahead in an attempt to secure funding it’s important to do your research.

The banks will have a checklist track record, experience and a clear credit history, and too many smaller firms haven’t done their homework here. Lime Consultancy founder Dave Farmer said businesses need to be better informed and better prepared when entering into discussions about financing, otherwise your chances of getting investment will be hampered.

Organisation

If you ask a bank for a business loan, the first port of call is making sure accounts are up to date. While it’s all well and good having a savvy accountant, as Farmer pointed out, if you end up fumbling on something you’re personally unsure about with my accountant knows, you’re effectively saying I don’t know.

The second necessity, often overlooked by small firms, is making sure you plan ahead. Want to borrow money in June? Make sure you approach your bank several months in advance.

Considering the alternatives

Elsewhere, the every-popular crowdfunding has numerous forms, which can provide seed capital and growth finance, so these are worth researching too. Their interest charges on a loan tend to be comparable to the banks. Other non-bank sources to research include utilising high-net worth investors, applying for grants or looking to Europe.

The advantage of crowdfunding though, is that it can be a useful route for those who don’t want to give away equity, but need cash to launch a new product. Jayne Bromfield did this when her design agency MwnkI Creative needed an injection of 8, 000 to cover the cost of a minimum production run for a construction project. The service is pre-selling a product, I’m not giving any equity away, she pointed out.

Of course, for this approach you need to win people over with your firm and yourself, so it’s important to know exactly what you need to achieve and why. There’s a trust involved, because these people are handing their own money over, Bromfield agreed.

The importance of a solid base of contacts comes into play here crowdfunding shouldn’t just be done on a whim. You need to plan it for a year before and build up your network, Bromfield explained. Tapping into your local community and finding out if there are any business breakfasts or similar networking events can be a great initial approach.

Tenacity pays off

As an owner of a micro firm, you’ll likely already know the mental toughness required to run your own business, and setbacks can and will happen here too. Try to use them as an opportunity to learn what has gone wrong for the future, and as a springboard to trying again perhaps with a slightly tweaked approach.

Bromfield for example, initially had raised 65 per cent of the total needed, but pulled out as Christmas approached because time sensitivity meant the product ideally needed to be ready for selling during the busy festive period.

Making sure you have a resilient approach is true regardless of what type of funding you end up deciding to pursue, and so too is the importance of being methodical and thorough. While we can list the various options out there, fundamentally you need to think about your individual business and what will work best for you.

Uncomfortable about giving away business equity for finance? That’s fine you shouldn’t feel pressured to go for angel investment, crowdfunding might be a better path to take.

Seeking finance can be an exciting time, but you need to make sure the groundwork is in place beforehand do your preparation, be realistic about what you can and should be achieving and keep in mind what you want out of the funding.

Image: Shutterstock

Topic

Lending

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