In this uncertain economic climate, many businesses may think that they’re unlikely to be approved for funding outside of the much-publicised government-backed loans.
However, other forms of finance are still available, and although some lenders may be more cautious than in previous years, there are some broad steps you can take to improve your chances of seeing your funding application accepted.
Here are 10 ways to make your business more attractive to lenders and improve your chances of securing business finance.
While not all apply to every product or lender, each can bring wider benefits to your business on a day-to-day basis for instance assisting with forecasting, budgeting and identifying weaknesses in the business.
1. Perfect your business plan
When it comes to traditional lending, such as loans and overdrafts, many lenders will look at your business plan before making their decision. For this reason, you need to make sure your business plan is the best it can be.
To achieve this you should make sure it clearly portrays where your business is heading, what your future strategy is and realistic financial forecasts. For the best results it must be professional, concise and well written.
For more tips on how to write the perfect business plan take a look at this guide.
2. Know your financial numbers
Lenders need to know what cash position your business is in, so it’s crucial to demonstrate that you know your numbers and have considered all the key factors that could impact your cash flow.
When assessing your funding application the lender will want to know: how much external funding your business requires, where this money will be invested, what your projected revenues and profits are and what assets you will need to acquire.
For more tips on cash flow forecasting take a look at this guide.
3. Improve your company’s credit score (if needed)
A key deciding factor for lenders is how big a risk they believe your business to be. Your credit score can be a good indication of this, so make sure it’s as good as it can be.
Improving your financial standing by making a conscious effort to pay bills and invoices on time can also enable you to negotiate a better rate.
4. Hire a strong management team
For many potential investors the level of faith they have in your management team can be a large deciding factor. So it’s vital to showcase the strengths of your team and explain how you intend to cover the key areas of production, sales, marketing, finance and administration.
It can also be beneficial to highlight how committed you are to the business through how much time and money each of the management team will contribute.
5. Reduce spending and improve Cashflow with invoice finance
Another way to show your business is not a risk is to demonstrate a healthy cash flow by cutting back on unnecessary expenditure. Analyse your current spending to see where your money is going and make cutbacks where possible.
Look at each outgoing and ask yourself if you really need it in order to be successful. Do the ends justify the means? This can help you decide which things can be cut and which ones are fundamental to your business’s success.
It can also be beneficial to regularly benchmark your existing suppliers to make sure you’re getting the best deals for your business – although be careful not to sacrifice quality for cost as this is potentially damaging to your business.
6. Be realistic
Whilst you might think you deserve access to hundreds of thousands of pounds, if you’re not going to be able to make the repayments, your business will not be considered. The key is to be realistic with your applications.
Similarly, when it comes to cash flow forecasting you needs to be sensible with your predictions. Failing to be realistic could cause you to fall behind on payments which won’t be good for you or the lender.
7. Do your homework on your business and market sector competitors
There’s no point pitching to a provider that won’t consider your business or applying for a product your business doesn’t qualify for. Do your research to familiarise yourself with the financial options that exist.
If you know exactly what you’re looking for, compare a few different lenders and get it clear in your head how the facility works and what you can expect. When you then approach a lender, you’ll be able to demonstrate a good knowledge of the product and how it will benefit your business.
Our free guide to funding products looks at the pros and cons of various facilities and can help you to narrow down your search.
8. Find brand ambassadors
Particularly with alternative forms of lending, such as crowdfunding, having brand ambassadors that love your products or services as much as you do can inspire confidence in your business idea and encourage investment.
9. Identify key risks within your business
Many businesses shy away from highlighting any risks or weaknesses though fear of putting off potential investors, but taking this approach can actually be counterproductive.
All lenders know that with each business there will be certain risks that will need to be overcome in order to be successful, and in the current climate there are key concerns that affect every business in some way.
By avoiding the subject completely it can seem like you haven’t explored all of the necessary avenues and put doubt into the mind of the lender.
In contrast, by openly discussing these disadvantages or weaknesses from the outset you can inspire confidence in your business plan.
10. Be patient
With so many different products and providers to choose from the road to funding can be a hard one, but don’t give up. There are so many funding methods to choose from and just because one option doesn’t work for you doesn’t mean that the right funding isn’t out there. Often you’re just not looking in the right place.
Global Asset Finance Limited can help to identify the best solutions for your business’s requirements. With extensive knowledge in the funding industry, we will listen to your funding requirements before introducing the facilities and lenders that will enable you to achieve them.