Raising Finance in The New Economy
Posted by David Rhoads on Tue, May 11, 2010 @ 04:20 PM
Whatever your potential sources of business finance, the changes in our economy and business climate have forced several new common factors on all businesses:
1. You should explore several options in detail. The days of simply assuming that your
current bank is the sensible source for your finance are gone.
2. Explore the short-term and long-term implications of your chosen finance route.
Short-term cash gains might be very useful – sometimes essential, but do your homework
on the longer term implications.
3. Shop around. Finance is like any other business service. The quality of service provided, the details and terms of the package offered and the full cost of the package do vary from lender to lender – don’t assume that all other offers will be the same.
4. Negotiate. Again, business finance is no different from other business services.
Don’t accept terms immediately – negotiate. Look at the overall cost to your business and
other factors such as seasonal cash flows. Demand better terms, payment holidays etc.
to suit your business. It’s your loan/finance – negotiate to get terms that favour your
business.
5. Prepare your business case well. Have others comment on it before going to your
chosen lender. Include enough information in your plans, proposals etc. to give the lender
everything they need to know to be able to make a decision. If the lender comes back
and requests further information, then you clearly have not enabled them to make the
decision with the information you initially provided. Include information on risks and
how you will mitigate the risks. Present your information clearly and back it up with bank
statements, key contracts/orders etc.
6. Provide regular, clear and complete updates to your bank/lender. Provide management
accounts, trading updates. Banks and other investors don’t like surprises. Keep them informed. If your information is clear and regular, the door will be open to finance discussions.