Craig Blackmore, Verde Corporate Finance
Funding expert Craig Blackmore from Verde Corporate Finance tells BQ his dos and don’ts when it comes to applying for funding for your business.
Applying for funding to secure the longevity or expansion of a business could be considered complex.
Whether it’s a start-up, SME, or large corporate looking to grow, all types of businesses are often unified in their need for funding.
Knowing where to start, what sources are relevant for individual needs, how to create an effective plan and funding proposition and how much funding actually required, can be challenging.
Being able to avoid the inevitable funding pitfalls, however, can help to ensure greater outcomes for the individual business and a more streamlined funding application process.
Choose the right funding source
Knowing which funding source is most applicable to your individual needs is the key to success, said Mr Blackmore.
With everything from traditional models such as bank loans, asset finance, and Government-backed start-up loans available, right through to alternative streams such as peer-to-peer lending, microloans, angel investors, and crowdfunding, - the process can be challenging, and businesses could be exposed to critical and costly decisions which they have little experience in making.
As such we would advise speaking to an experienced funding advisor who can set you on the right path at the earliest stage.
Your choice of funding will determine how you move forward with your plan. Make sure you don’t miss out on a financing option that might fit you and your business and could leave you in a better position for the long term.
A bank loan could seem like the ideal solution, however, it can be difficult to meet lending criteria and security requirements.
Capital intensive businesses might consider an asset finance option, which allows them to borrow money against existing assets, in the same way as a mortgage.
Due to its risk of repossession, if there is a default on payments, it is important to ensure that your cash-flow projections show affordability for servicing the debt – and be realistic on those projections!
Choosing the right funder or investor could be the key to helping you to achieve your business aims and taking the company to the next level.
Demonstrate you can budget
Being able to produce a well-considered, highly detailed budget will demonstrate to potential funders that you are a good investment.
Businesses which can provide evidence of robust processes, reliable financial information and support income assumptions and projections will score well with funders. Projections must be based on sound assumptions and reflect historic trends alongside expected future growth prospects.
Remember to ensure that any budget which is produced for funders is clear and concise, and doesn’t overcomplicate the request or bury it in unnecessary detail.
Consider your outcomes
Being able to identify why receiving funding is crucial to the progression of your project, and what outcomes this will achieve, is vital.
When looking to secure funding it is imperative that you outline your outcomes, how these will be achieved and how you will demonstrate that they have been met.
Failing to do so could dissuade funders and simply demonstrate that your vision for the business is unclear.
It is essential that you prepare these for any potential funders to show that the plan is thoroughly considered. Detail who will see the positive effects of the business and how. What are you trying to achieve? And outline who your potential competition is in the market.
Forget your business plan
While this may seem like an obvious component of any funding pitch, it is worth stressing its importance.
A detailed business plan demonstrates to investors that the project is thorough and financially viable, and absolutely worth investing in. It also outlines the company’s goals in a realistic manner, potential future threats, strategies for growth, and potential opportunities within the market.
An effective business plan should be well organised into individual sections to enable potential funders to find the most relevant information.
When drafting your plan always consider your audience, research the source thoroughly to ensure the plan is tailored to their strengths and therefore more likely to achieve success.
Be tempted to exaggerate
Embellishing your projected growth or financial capabilities could lead to investors quickly uncovering the truth.
Potential funders will want to probe your ROI projections, specific budget plans, and market analysis during a presentation, which could ultimately lead to funding being rejected if the figures have been exaggerated.
It is advisable that you produce up-to-date figures for the business, or realistic aims, which will demonstrate to the investor that the business is reliable and well managed.
Forget to plan ahead
Receiving funding is often a lengthy process, which could be impacted by numerous delays.
Time-sensitive issues including due diligence, legal requirements, or documentation completion could hinder the funding request, with funds potentially taking months not weeks to be raised.
As such it is always advisable to plan ahead for securing funding, or when it is evident that additional funding is necessary.
Whether you are launching a start-up or expanding the company, it is essential that you set a realistic time frame for obtaining funds.
Verde Corporate Finance is the financial arm of the Greenaway Scott Group, a multi-disciplinary professional advisory business within the mergers and acquisition sector.
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