Accessing business finance – a few vital steps
Various studies have suggested that more SMEs plan to access finance in 2014 to drive sales and profit margins, but what is most important when looking for funds?
Growth requires financing and it’s fair to say that the relationship between banks and small businesses has hit an all-time low.
The growth of crowdfunding and peer-to-peer lending has helped to plug the gap in financing these businesses, but the amounts on offer are still way below what is actually required.
Accessing money from banks can still be achieved, but a few vital steps are required to ensure it is possible.
Planning ahead
Business plans will form a fundamental part of any request for finance, as detailing your future finance requirements will revolve around what direction the company is heading in.
A period of success is likely to be met with an increased need for finance as sales are boosted; while a period of poor sales could result in redundancies.
Therefore, having a clear idea of where a company is and how much it can improve are vital to ensuring that the right steps are taken in order to reach that goal.
Potential pitfalls in the plans can be identified, while it also gives the bank a point of reference if they believe the business is not meeting its targets.
Having the correct figures
When requesting finances, it’s equally important that all the figures add up – financial statements present everything there is to know about a company, so having them up to date is essential.
At the same time, management figures that reflect the immediate past will also be desired by the bank, as they reflect a more up-to-date situation.
Projections of profits and losses will also be important in convincing the lender that the business is a viable proposition in the long run.
Setting a business up for investment
A business that is bleeding money is likely to struggle when looking to access finance as potential investors and lenders would want to know where the money is going.
It is also a part of covering whether or not any potential overdrafts or loans could be repaid and if any projections will actually be met.
Preparation is imperative, as it means issues can be tackled before they become too widespread, but banks will still probabaly want to go through a very stringent checking process before agreeing to lend.
By Phil Smith