You’ve had the light bulb moment and worked late into the night to turn your great idea into a potential business. Now you just need the finance to take it to the next level.
But getting funding can be your most difficult challenge of all. What can you do to make your company look as attractive as possible to the bank manager or potential investors?
No one likes being rejected, so follow our simple five steps to ensure that funding comes your way.
1. Do your homework
Before you pitch to your bank or investors, read up on them to find out what they’re looking for. Make sure you have all the documentation your bank requires and all the exciting sales forecasts that will make you irresistible to investors.
Conversely, you also need to go into every meeting knowing exactly what it is you’re looking for from the bank or your investors. If you don’t, you may end up with an unsuitable loan or an investor with too high a stake in your company.
2. Go in armed with a good credit score
A strong credit rating could make a real difference to your business. It makes your company seem reliable, reputable and worth doing business with – great if you need financial help to get you over tough times.
The better your credit score, the more likely it is that the bank or investors will look favourably on you. This can be a problem if your business is brand new, but you can always get a personal rating to show that you as a person are a good risk.
Before you apply for funding, get a copy of your credit report and then try to improve it. Your first step should be to fix any irregularities, such as outstanding County Court judgments.
To improve your score, or keep it steady, it is important to demonstrate your creditworthiness by handling finances in a timely and efficient manner and make sure that all details on your report are always correct, such as the address and tax codes.
3. Tighten up your business plan
A proper business plan is one that is thorough and realistic, easy to read and preferably one that has been checked over by an accountant first. While it is good to display passion in your venture, it is important to strike a balance when making predictions and ensure your forecasts are not overly ambitious. Keep things realistic and you’re more likely to succeed – and to get others on board. Banks and investors alike need to see that your business plan is coherent and watertight before they will consider lending any capital.
The plan should set out your goals and how you intend to achieve them; outline your business operations, what market the business is aimed at and how much that market is worth; who will be involved in the business, how their skills are relevant and how they will help to enable its success.
Realistic financial projections are also required. You might think you have a billion-dollar idea, but you probably won’t get there overnight. Venture capitalists and other lenders want to see that you’re taking a considered approach to business and not being over-ambitious. After all, if they are going to trust you with their money they want to feel confident of a return, even if they aren’t averse to a little risk.
A financial summary should consider expected sales and how you anticipate these will grow. Provide details about what your profit margin is, what your costs are and when you expect to break even. Of course, you also need to decide how much funding you will require to get the project off the ground, or to grow it.
4. Perfect your pitch
Don’t think a good business plan is enough – you need to pitch it properly, and that starts the minute you walk in the door. Be on time, dressed smartly and prepared to deliver a well-rehearsed presentation. Go over any questions you think may come up and prepare a folder with any documentation you may be asked for.
5. Consider alternatives
To bolster your finances without being tied down to a conventional loan or investment injection, services such as asset-based lending can provide a real advantage. The service provides capital based on invoices raised, so you are simply freeing up money to which you are already entitled.
Having working capital to hand, rather than having to worry about chasing clients for money or waiting the standard 30 or even 60 days for payment, allows you to focus on the important tasks of streamlining your business model, making a watertight business plan and sound financial projections.