A completed funding proposal can be presented to your existing bank, as well as to other potential funding partners.

If your existing bank were to say no to your funding request, you won’t have to start the process over again with a new lender, all the work has been done, you can instead just present them with the same completed funding proposal.

Furthermore, you may wish to submit the funding proposal to multiple lenders simultaneously, giving you leverage to get the best deal available.

• A Strategy for what success looks like

• A Strategy around debt and equity

• Strategies to manage risks

• An Exit Strategy (for ownership transition)

These are some of the key strategies you should be clearly articulating to your bank and other lending partners when seeking funding.

Almost as important as cashflow, and more important than security, a business’s strategies are a key component of a bank’s decision to lend, and on what terms!

a) You could be like Oliver, “Please Sir, may I have some more?” where you essentially walk into a meeting with your bank manager empty handed and ask them what information they want from you in order that they can provide you with the funding you are so desperate for.

or

b) When seeking business funding, take control of the conversation, leverage your strengths, articulate a well-defined strategy, and be clear about what you require and why.

Don’t wait for your lender (investor) to ask you for the information they require!

Be prepared in advance, anticipate what information they’ll want to see.

Present to your bank or other lender with an in-depth funding proposal designed to promote the unique aspects of your business, and why lending to your business would be a good investment for them.

A funding provider (a bank or asset finance co. etc.) is an investor. Like any other investor, they will undertake their own assessment of the risks inherent within your business, and the risks involved with investing in (lending to) your business. The outcome of that assessment will impact not just their decision of whether to lend or not, but also the terms on which they might lend:

• Interest rate

• Repayment profile/term

• Covenants (Equity cover, Interest cover, etc.)

• Nature of security they require

Any gaps in their understanding of your business may mean that they allocate a higher risk rating or risk profile to your business.

In various ways that may then cost you more, in terms of both:

• money (higher interest rates and fees); and

• time (complying with onerous covenants and conditions).

Do you have the time to be collating, summarising and analysing all the information required by a bank or other lender, and do you understand why they request all the information that they do? Is that your area of expertise?

Do you have years of experience analysing and reporting on business risk, on industry risk, analysing and testing cashflow forecasts, preparing detailed commentary on financial performance and balance sheet structures, and then presenting that information in an equally succinct and yet detailed manner?

Could your time be better spent by working on areas of your business where your skills and capabilities are more closely aligned?

If you’ve been in business for several years, your business funding facilities may no longer be appropriately structured to best suit your growing business.

A review of your funding facilities may be appropriate.

In the early day of your business, it may have been necessary to provide your bank with a mortgage over your home to secure business lending facilities.

Perhaps as your business has grown you may have purchased a commercial premises and your bank also holds mortgage over this and other properties too.

For more established businesses, the business may now be at a point in its lifecycle where it should no longer need to be reliant on property security to support its lending facilities.

If they weren’t tied up supporting your businesses loans and overdraft etc., could you utilise that equity for some other purpose?

A review of your funding facilities and security structure may be appropriate.

Is your business an asset of value in its own right? Does it have appeal to an investor/buyer?

Is your exist strategy possibly to sell at some point in the future?

As you start to consider your exit strategy, it becomes important that you consider whether your business has the ability to ‘stand on its own two feet’ so to speak, and not be reliant of supporting property security.

We can help you to formalise an exit strategy and work toward structuring your business in such a way to make the transition to new ownership go smoothly.