You could have a very sound business plan and a great strategy, all banks are willing to do right now is extend services like invoice discounting or factoring (which is releases capital from your order book). Banks want want security for any lending, they always did but now you're screwed unless you can sign over your home and even then you need to have a stack of equity in it.
In these challenging times a fast growing business will always need some form of financial support to manage the peaks and troughs of cashflow, or to get a great idea off the ground. So what are the alternatives?
In Wales we have an excellent organisation backed by the Welsh Assembly which was created to fund growing businesses. Finance Wales offer both capital lending and equity investment. If you are based in Wales then I highly recommend contacting them, my own experience has been first class and this is an excellent route.
Also in Wales we have Xenos, which is a country-wide Business Angels network, again backed by the Welsh Assembly. Business Angels are typically private, early stage investors, excellent as a source of seed capital. If you choose the right investor then you gain an invaluable ally who will be there to provide support not just in cash but in hard earned business experience. Again I speak from first-hand experience.
A great approach is to mix both, Finance Wales will always be re-assured by the presence of a private investor.
In the rest of the UK there are other organisations similar in nature to the above;
Finance South East Angels Network
South Yorkshire Business Angels Network
North West Business Angels
Those are just a few, contact your local Business Link office to find out of there is an Angel Network in your area.
Before you start looking to raise funding you have to be able to answer the questions you will be faced with quickly and with confidence. Know your business, your market, upside down and back to front. Here's a quick checklist;
Business Plan - This is more than just a dry financial forecast, you should be setting out what you want to achieve and how. Details on the market you will be competing in, opportunities for growth, background on the team. Let your enthusiasm for the business shine through.
Talking about the team - Sometimes a business is just one person but you need support. Every business needs the following;
- The creator and visionary
- The evangelist...your sales person.
- The sensible one....good at counting and paperwork because the first two probably won't be.
Independant Sales Agents, Public Relations Agencies, a dealer network or channel will help you get the word out, no one will have the passion of someone who is part of the original team though.
Outsourced bookeeping and accountants. Instant electronic communication means that you have access to a wide range of financial support services. You need a steady hand to keep you on the straight and narrow, especially if you're growing quickly.
Cashflow forecasts
If your background isn't in finance and you don't have a bean counter on the team from the get go find someone who can help you with this. The worst thing you can do is get this part wrong and be crying out for further investment in 12 months time. What happens if you win an opportunity which means you need to recruit and pay three bodies for a month before you get the cash in from your customer?
No forecast is 100% accurate, especially in this "crunch" period but spend time here and you'll save yourself a world of hurt down the line. If the forecast shows milestones where further injections may be needed, put them in, an investor will respect you for it.
Don't under-estimate how much cash you'll need, if the rewards are real then ask for a real figure, don 't be embarassed to ask for money. If an investor sees an opportunity it's because they see the potential for profit on their original investment. Do your homework, find out what other businesses like yours have been sold for, show potential investors what kind of returns they can expect.
These are things I have learnt over the past seven years, having gone through the process of securing funding from banks, government institutions and private investors. They still have money, they still want to see exciting opportunities. If I had ready cash I'd be aggressively investing right now, you can believe other people are too.
This isn't a comprehensive "howto" but I hope you pick up a few valuable pointers. Feel free to drop me a line if you want to pick my brains on anything covered in this post, one thing about business people, we LOVE talking business. Good luck. ♦DiggIt! ♦Add to del.icio.us ♦Add to Technorati Faves
Posts
