How to secure funding for your small business
Growth is a priority for many small businesses, however finding and securing the right financing may seem like a minefield in the current climate. In fact, research from alternative finance provider Liberis has revealed that over 60% of UK SMEs said they require funding to grow, but 57% of these were unsure how to obtain it.
While there are a number of traditional and alternative financing options on the market, the path to actually securing investment is not always straightforward. And whether you’re a seasoned entrepreneur or a first-timer, actually bagging this cash can be a challenge.
To help, Rob Straathof, CEO at Liberis has put together the following top five tips on what you should do to support you in securing your business’ investment.
Strengthen Your Position
Before you’re ready to reach out and source funding, it’s important to be realistic about your business’ position and your existing cashflow. Small businesses are highly dynamic, so make sure to constantly revisit your budget and refresh it regularly so you can ensure you’re working from accurate figures. Take stock of your current income, your expenses, overheads and record it all in a profit and loss statement too.
One way to further strengthen your position is to get noticed – for the right reasons, of course. This can be key, particularly if you are seeking funding from an investor as often they will only be looking to support the most innovative businesses.
Building a positive, supportive network of referrals can be a great way to get yourself seen and to pick up useful tips and recommendations too. So, make the most of small business events and networking opportunities, they’re everywhere! Just grab your business cards, questions and warm introductions to get started.
Shared knowledge really is key! So ask your fellow entrepreneurs for as much advice as possible and learn from others’ experience: which providers worked for them and which didn’t; what key questions should you be asking your suppliers; and who caters best for your business type. This insight will be incredibly valuable when reaching out for funding.
Your Credit Score
When applying for business finance, funding providers will use a credit bureau to look at your credit files and your credit score. These numbers are indicators of how likely a business is to fulfil its financial commitments, so keeping them healthy can be vital to business owners in need of investment.
Be aware of factors that can affect your credit score such as your track record for making payments (referred to as your credit history) and any financial connections you have to other people, such as a business partner. As well as this, it’s worth having an understanding of what you can do to improve your credit score too such as cancelling unused credit cards and keeping a close eye on both your personal and business credit files.
Maintain your credit score well both in the short term and long, and you are sure to boost your chances of being accepted for additional business finance.
Closing the Deal
Whether sourcing a bank loan, crowdfunding or investment from an angel, closing the deal is one of the most sensitive elements of acquiring funding. You have to be prepared to make a genuine pitch, so write a script and be prepared with answers to any difficult questions that my come your way. Funding providers will want to understand not only the position of your business and how you plan to use the money, but what your key challenges and current opportunities are too.
When it comes to small business finance, there is no “one size fits all” solution. But we hope that these tips will provide you with a little guidance on how to reach your business’ full potential when making applications and building towards your goals.