How to find additional funding for your business

Whether you need more stock, new machinery to manufacture new products, increase factory or retail space or just need to increase the number of employees, gaining access to additional funding can give your business the boost it might need. But short of applying to try and win an investment on TV’s Dragons’ Den, what are the key steps to successfully obtain funding?

Before jumping in and filling in many application forms, you need to consider what your lender will need to know: will the investment increase the long-term value of your business?

Do you have a viable proposition, and how much risk is associated with your investment? So it’s wise to plan and get organised:

Put together a cash flow forecast

This should be for a minimum of 12 months and two to three years for larger loan applications. It’s wise to obtain support from your accountant or a business adviser. They will help you sense-check your calculations and understand the impact on your cash flow in the future. They will also help produce clear projections to substantiate your loan requirements.

Produce a business plan

It’s good practice to write a three to five-year business plan. This will support your application and also show the lender that you’ve done your homework – You’ve researched the market and you can demonstrate the long-term future outlook and growth of your business, i.e. you have a plan supporting and linked to the financial forecast.

Be clear what you will use your funding for and when you need it

Is it just to buy more stock, or to expand your products or services, for instance? It’s also wise to highlight the timescale in respect to when you need to drawdown the funding, as again this can affect loan conditions and overall interest payments.

Do your research on funding partners too; as there are many types of funding available – some for larger loans and others if you just require a short-term cash flow facility. Also, note some funding can be available for specific business sectors.

So to reiterate, it’s important to know how you will use your funding and therefore engage with the most appropriate type of funder. Ensure you ask a trusted associate, such as a business coach, bank manager or your accountant for advice before making a decision, or wasting your time filling in numerous applications.

Packages that keep cash flow moving

From overdrafts to loans, traditionally, banks offer a number of packages that can give you access to funding quickly to help improve your cash flow or build up your business assets. Increasing you bank overdraft, for instance, can help fund short-term requirements, such as increase in stock purchases for a quick turnaround, or to accommodate increases in business generally. While larger business bank loans and independent asset finance lenders can help you buy plant, machinery, new office equipment, or invest in infrastructure.

Alternatively, I know of people who have used their business credit cards successfully to obtain extra or competitively priced stock, or pay deposits quickly. But remember to be aware of the interest terms if you cannot pay off the full amount within the free period.

Invoice discounting, is also worth considering if cash flow is your real growth barrier. However, it’s a good idea to speak to your bank manager or your business advisor for further information on this facility, as it may not be for everyone.

Government funding for flexibility

There are different government-backed schemes available like Funding Circle – a quick way to get funding involving peer-to-peer lending. Businesses or organisations with surplus cash, along with the UK government, put money into a central pot, which then can be lent out to other businesses.

Between £5,000 and £1 million can be borrowed and funds are typically available within a week. The scheme is flexible, offering six-month to five-year loans. You can get a quote, check you’re eligible for a loan and apply online through the Funding Circle website. However, insure you fully understand any Ts & Cs and be aware of the interest charges, payment terms and any default charges before you go ahead.

There are also local funding scheme providers in partnership with either Local Enterprise Partnerships (LEP) or local authorities, councils and chambers of commerce, so consider doing a little research yourself. A good place to start is  www.gov.uk/business-support-finder  or locally Enterprise Answers www.enterpriseanswers.co.uk

Grant schemes for staff building

There are many grant schemes aimed at businesses that have growth opportunities, and investment with intensions to increase employment.

Grants are available at a local and national level and usually sector specific. They offer between £2,500 and £100,000 for SMEs, but funds can be unlimited for larger business within EU state aid programmes.

With grants you don’t pay the money back. However, it’s worth noting there may be clawback terms if you falsify claims in respect to expected outputs of the grant. Therefore, applications need to have a compelling argument and go through a high due diligence process, as businesses need to justify there’s additionality i.e. why they need funding.

Obtaining a grant can also be a long drawn process, taking several months to receive an

offer.

Key things to remember

1. Do your research and know your market. A lender needs to know your company is a viable and sustainable business to fund. So it’s important to spend time preparing before applying. It’s not just about knowing your finances. You should understand your market sector, highlight any opportunities and understand your main competitors too.

2. Obtain support and advice. It’s wise to get several trusted advisors to help you through the funding application process, such as an accountant to advise with the financial side and a business consultant to help you know how best to prepare the supporting plan to give strength and depth to your funding application.

An advisor can help you define your business’s core values, purpose and competitive edge linked to your future opportunities, making sure you support an application with market research. One of the main reasons why businesses fail when applying for funding is not providing enough research and substance to their application. Advisors can also put you in touch with the most appropriate lenders willing to invest in your business saving you time.

3. Prepare to be turned down. It’s worth remembering many businesses are unsuccessful the first time they apply, so don’t be put off if your application is declined. Instead, learn from the process, ask the lender why and consider doing further research and improving your business plan before applying elsewhere. Note - your ability to obtain credit can be negatively affected each time you have an application rejected as credit searches tend to be logged with the main providers.

Spending time preparing a strong case and compelling argument can save you a lot of stress and time. Ultimately, when your grant or loan is agreed you will then be able to focus and prioritise your time following the plan you prepared and therefore, building up the value in your business.

Funding can give your business the boost it needs to develop. Proper preparation, thorough research, getting professional advice and being able to clearly explain what you need funding for to the right lender is more likely to lead to a successful application. And, as a result, help you obtain the financial support for a better, bigger and more profitable business for you.

If you are looking to grow your business, Business Doctors Cumbria offer a free business health check where we can help you to set a clear vision to understand the steps you need to take to fulfil your aspirations. Contact Peter Fleming 07966 686112 email peterfleming@businessdoctors.co.uk

Request your free business health check here:  www.businessdoctors.co.uk/health-check