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