Preparing your business for investors

Business owners often view investors as an alternative to bank finance. In most cases entrepreneurs would seek to raise external equity because they are running out of cash and were turned down by a bank. The only message that investors would receive is that the entrepreneur lost control of their business regardless of how you dress the situation up. If you were an investor, would you want to put your hard-earned cash and invest significant amount of time in such a venture?

So, when is the right time to start raising external equity? And what can one do to ensure that the business is ready to attract and secure investors?

You Are What You Do

Our lives are getting increasingly busier and more hectic. People in the UK work the longest hours in Europe and we seem to be proud of it! Recession doesn’t help either, does it? It is always one thing after another... Before we hit the Credit Crunch, we were too busy borrowing, expanding, building our businesses and didn’t have for anything else as we were just too hungry for more and more business. Now that we are in recession, we are far too busy saving ourselves and counting pennies. But why? When does it end? When are actually going to enjoy what we have been so busy building? Or does it mean that we are just going to bite our lip, swallow our pride and keep going until retirement? (if we have anything to retire on at all, that is)

Let’s admit it. We, Brits, are far too stubborn when it comes to asking for help. We think we know best. We can’t possibly allow someone else to look after our possessions, families, businesses... We are just not used to getting help. WE DON’T TRUST ANYONE! And when we do get help, we expect it for free (or as good as) with results exceeding our expectations.

Have you ever watched that programme “You Are What you Eat”? Would you agree that the same is true of your business and what you do? People in business sometimes have to “wear too many hats”. We all have to be Finance Directors, Operations Directors, Strategists, Development Directors, look after Sales & Marketing and so much more... It is no wonder that things start to slip at some point: invoices are going out late; some of the bills are overdue; we lose customers because we are too busy chasing customers either for payments or trying to get new ones... Of course we have no time for strategies or planning! How would we? With everything that is on our plates! Yet, we still don’t need help! Amazing, isn’t it?

There is plenty of help out there. Granted, you need to ensure that you get the right level of support and it is worth your time and money. In my mind, any help or advice is worth it! Do you know everything there is to know about business? Do you have time for new ideas and, more importantly, implementing them and know how to? I know I don’t and don’t pretend to either! Being a Business Advisor I don’t have to know everything about everything. I rely on support of my peers, clients and friends. People that surround me. And, yes, I have to ask for help and pay for it too. I appreciate professional advice and help and I need it. There is nothing wrong with that at all! Someone once told me that “it takes a strong person to admit one’s weaknesses”.

· Do what you do to the best of your abilities.
· Get help when it’s needed.
· Be honest, open and transparent in everything you do.

These are the mottos I live and work by. Do you?

Liquidity in Business – Where to Look For Help

We all hear on the news that the banks don’t lend and businesses suffer through lack of that support. But why don’t they lend and where can SMEs go for help when a business has a viable product or service but all that it needs is finance?

Firstly, contrary to what we see and hear in the media, banks still provide lending to businesses. However, their criteria have changed as they had to tighten the rules. For too long did the banks provide finance to businesses that would not be able to afford it or would not qualify for. In addition to that, was it the right type of finance in the first place? But let’s not dwell on things that happened in the past. It’s onwards and upwards, as they say...One good thing that some banks are doing is actively trying to help businesses by providing information on how to manage your money and trade through the economic downturn. One of such banks is RBS with their Money Sense for Business. Have a look at their latest information page.

If you are looking for finance for your business, firstly, identify what the loan is for. Is it for training? Purchase of assets? Or another type of project in your business? This will provide you with a number of options of what type of finance you would need and where to go for it. There are numerous options out there on the market. If you are not sure what finance to apply for, click here for help and speak to your accountant or another independent specialist / business advisor who will be able to advise and help you.

Once you know what type of finance you require for your business growth and development, be sure to prepare to answer a lot of questions!Here are some tips to prepare an application for business finance:

• Get your Business Plan up-to-date
• Clearly state what the finance is for. Outline how this finance (or what it is for) will assist your business
• Do your research. Find out who your main competitors are and what makes you stand out from them
• Get your financials in order: it is usually a requirement to supply 3 years’ accounts for established businesses.
• In some cases lenders would accept Management Accounts
• Get your business and personal bank statements for the last 6 months as some lenders will not consider your application without them
• Prepare a details cashflow forecast. Remember, you must demonstrate that you can afford this borrowing and it will not drain your business and personal finances

There are also other options for businesses, such as De Minimis Aid, which includes various schemes either provided or supported by the government. These include:

• Small Firms Loan Guarantee Scheme (SFLGS): this is where a security is required by a lender, but it is not available from a business or its owner(s). If a business is qualified for such a scheme, the government will underwrite 75% of the loan. You may still have to find the remaining 25% worth of security though
• Government grants through Business Link and Local Authorities
• Train To Gain

Contact the relevant body to seek further information.