BTG Corporate solutions
There are now increasing numbers of different options for you to obtain finance for your business. These range from the traditional Banks we are all used to, the new challenger Banks, many specialist asset based lenders, government schemes and the much publicised crowd funding. With so much choice available it’s important for business owners to understand the options and which is the right source of finance for them and their business.
The choice depends a great deal on what stage the business is at in its life, be that start up, growing, established or planning for an exit or succession. It also of course depends what the finance required is being used for. All too often longer term assets or projects are financed from short term funds creating unnecessary pressure on available cash either through unnecessarily high repayments or through using available working capital.
So what can you do to find your way through the maze to ensure your business needs are met and at the right price?
Before seeking finance make sure the Business has a clear plan which enables it to anticipate market changes, seasonal factors and changing market trends. Understand the impact of any of those changes on the business to ensure there is no crisis in the future. It should always be possible to do a forecast to achieve at least a break even level of sales. This will ensure the business does not over commit. If financing assets then seek to match the funding to the asset for example long term loans for property, shorter term loans for Plant and Equipment.
Control the cash
Businesses can survive when they make a loss but they always fail when they run out of cash. Strict management of cash and understanding the future flows helps identify future financing requirements and enables you to have sensible conversations with lenders. Invoice Discounting is a very popular form of finance now for Debtors and is particularly useful for financing growth providing funds that match the growth in Sales and invoices issued.
Timely and accurate information is vital to successfully running a business. It is also essential when borrowing as inaccurate information gives a false picture and out of date information means it might be too late to react to changing circumstances.
Be realistic about the expectations for your business when planning and when raising finance. Don’t over commit the business with heavy repayments it may not be able to afford. Take care understanding the terms of any finance agreement, ensure it is what you were expecting, that the cost is what you have forecast and there are no hidden extras. Understand if security is required by the lender what the implications are for that security should there be a breach of terms. Often Personal Guarantees are given without an understanding of what they mean.
A large proportion of UK businesses are owner managed and being in charge can be lonely. Be prepared to seek help outside your own area of expertise so you can focus on where you can make a real difference. This applies to all areas but in particular these days when seeking to raise finance.
BTG Corporate Solutions assists businesses to raise funding in a cost and time efficient manner, via its experienced team of finance professionals.