| There are so many questions from SME businesses | | | | less attractive than the wrong product with the right |
| that are looking for debt finance of some sort or | | | | team! |
| another. Valuable time is wasted by SME stakeholders | | | | - Ability to deliver in spite of setbacks |
| trying to source the right deal from the right people at | | | | - Product / Service |
| the right price for the right reason. It can be a minefield | | | | - Do you have a unique selling point (USP) that makes |
| which may not be as desperate as leading to a | | | | you stand out from the competition? |
| company downfall but lack of funds not available within | | | | - Have you protected your interests in the product or |
| a reasonable timeframe can spell the beginning of | | | | service? |
| missed opportunities, months of struggle and eventually | | | | - The marketplace |
| an insolvency disaster waiting to happen. | | | | - How big is your market? |
| What is the finance for? | | | | - Who's your competition? Tip: Never say 'we don't |
| Be clear on what you want your finance for. If you are | | | | have competition'. You may have a USP but there is |
| looking at: | | | | always competition even if it's an alternative solution to |
| Working capital | | | | your offering. Make sure you come across as |
| Expansion - skills, diversification or perhaps | | | | knowledgeable about how you fare against the |
| acquisition | | | | competition. |
| Development of ideas | | | | - How will you get access to your market? |
| For use in the actual product or service | | | | Really understand these key issues. The funding |
| Proving the market | | | | companies are checking you out as much as the |
| Proving the product | | | | numbers relating to the deal. |
| Or something else in this vein then go for it. | | | | Don't ask for too little or too much |
| If you are looking for funds to: | | | | If you really understand your business to the level that |
| Cover losses | | | | a funding company would like then you would get the |
| Repay your debts | | | | request for money correct the first time you ask. It's |
| Paying your salary | | | | embarrassing if you get the figures wrong. |
| Then generally speaking, forget it! | | | | Write out a cashflow forecast for your proposition. |
| Have you seen Dragon's Den on BBC2? What | | | | Remember that the greatest gap between revenue |
| happens when the entrepreneur divulges the fact that | | | | and overhead costs may not be month 1 or 2, it may |
| the funding they are looking for is to go on wages? | | | | be 8 months down the line. |
| Yep, even if you've not seen the show you can | | | | A typical cycle for raising finance may take 2 to 18 |
| probably guess. The entrepreneur walks away | | | | months. If you run out of cash in month 9 and you're 5 |
| empty-handed. If you are just trying to repay debt then | | | | months from the next injection of funding then you |
| perhaps it's time to talk to the professionals and get | | | | may not survive the year. The extra costs associated |
| some sound advice. | | | | with filling a cashflow gap may also squeeze your |
| Types of finance (UK) | | | | margins to the point you operate at a loss. |
| Consider all the funding options available. Look around | | | | Too much funding is equally embarrassing. You have |
| your local area, talk to the chambers of commerce, | | | | to pay the funding company for that extra cash in the |
| find out the local investment trusts. Ultimately, make | | | | business and potentially at a later date request more |
| sure you pitch to the right type of funder to suit your | | | | funding if say you hit upon a needed expansion plan. |
| borrowing requirement. | | | | What will the perception be of a company asking for |
| As a rough guide, consider: | | | | funding who were wildly out on figures the last time |
| Debt finance / Small firms loan guarantee | | | | around? |
| (SMFLG) (£5k+) | | | | Summary |
| Friends and family (Up to £80k) | | | | There are a number of options available in the UK for |
| Business angels (Typically £50k up to | | | | business funding. |
| £500k) | | | | Asking for the right amount of funding, for the right |
| Specialist funds / sometimes wealthy | | | | reason with the right lending source will save you time |
| business angels in a niche market (Up to £2M) | | | | and costs. Make sure you do the work and |
| Venture capital firms (£1.5M+) | | | | demonstrate your ability to run and manage your |
| Outside or in conjunction with the above you may also | | | | business. |
| do well to consider asset finance companies | | | | As a footnote, if you still cannot get funding and are |
| (assuming you have assets in your business) and also | | | | faced with insolvency / personal debts and you would |
| invoice discounting / factoring (assuming you have a | | | | like some help and advice then do get professional |
| debtor book and robust contracts terms and conditions | | | | help as early as possible. |
| of business). | | | | Ed Pearson is a Debt Dr. He can be reached in |
| Some key issues | | | | confidence on 07970 659266 or e-mail on |
| The funding companies that you approach will be | | | | ep@debtDr.co.uk. 'Prescribing a life without debt' |
| looking at other issues surrounding your business. To | | | | This article does not constitute regulated advice. |
| be a little crude, they'll want you to 'show them the | | | | Please remember that any action regarding financial |
| colour of your business underwear'. So what will they | | | | advice should always be taken only after considering |
| want to know? | | | | the specifics of your own situation. |
| - Financials | | | | Ed Pearson is a Debt Dr offering debt help and advice |
| - How do the numbers relate to your plan? | | | | to individuals and small businesses across the UK. |
| - Are the numbers consistent? | | | | Whilst you may love the stuff he writes, you should |
| - Can you confidently recall the key numbers and | | | | only ever take action once you have considered your |
| understand how they relate to your business? | | | | own set of financial circumstances with a professional. |
| - The management team | | | | This article does not constitute financial advice. |
| - The right blend of skills to see the goal through? | | | | Please e-mail if you'd like to chat further on any area |
| - Concentrically focussed? | | | | of your debt finance. |
| - The right product with the wrong team is generally | | | | |