Tip 13: Get your Finance here.

Probably the biggest concern of any business looking to grow at present is finance – how to get it when you need it, and how to keep it when you have it. Some businesses are able to generate the cash they need for investment from their existing profitable product lines and that’s great. For the rest, it is time to embark on the trek that is external sources of finance.

In the past the bank was the first port of call to try and get a loan and/or an overdraft. Banks are still a good start point, although clearly in the current climate it is more difficult to get them to say yes. You will have some chance of success if you have a proven business model, with a strong management team. Ideally you will also have some assets, including stocks and debtors, as banks are increasingly using asset based forms of lending. If you don’t have assets or other conventional security, you may be able to use the new Enterprise Finance Guarantee scheme.

If a bank loan or overdraft is not suitable or not available there are a number of alternatives available including, in no particular order, friends and family, business angels, venture capitalists, specialist funds (both Government backed and private) and government and EU grants. If you are looking at fixed assets, leasing may be a viable option.   

There is a lot of private money around at the moment looking for a return, given the peanuts that cash on deposit is earning. Not surprisingly it is able to strike a hard bargain, unless you have a really compelling offering, and can generate competition among investors. There are likely to be more opportunities to access this money in 2010.

Meanwhile if you are looking to raise money in the capital markets, the story in 2009 was that institutions were by and large shunning smaller entities and new entrants to the market, and using their funds to support larger companies and existing investments. The word is that there are a number of businesses looking to float in 2010 so maybe sentiment will change.

Whichever route you go down you need to make your funding case as compelling as possible by showing a good understanding of market and why your product and service will sell, demonstrating the quality of your people and realistic, believable but exciting financial forecasts. If you are an early stage business or start up, generating sale revenues as quickly as possible will help as well as indication as to how quickly the business will be cash positive and profitable.

It will also help if you understand your potential investor, what they like investing in, what their track record is and what ticks their boxes as far as their investments are concerned.

It still won’t be easy to raise finance in 2010 but if you follow the advice above and prepare properly, you will at least give yourself the best possible chance of success.

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