Financing Growth – the easy way
Is there such a thing as “Financing Growth – the easy way”? The term “easy way” highlights some important questions:
- To what extent does your ambition for the business require finance?
- What amount and source of finance best meets your growth aspirations?
- How do you make your business attractive for potential funders?
- And, once the funding is in place how do you capitalise on the ‘personality’ that comes attached?
Ideally the easy way means creating a simple and practical process that allows businesses to answer these questions for themselves.
As with each of the themes, a lot of background research is required into the topic. As well as confirming well established facts, such as different stages of growth require different sources of finance, it also provided some interesting insights. In particular:
- It appears that the supply of finance is no longer a key issue and that it is more the demand for finance and the availability of “investible businesses” that needs addressing;
- The funding landscape remains a highly confusing maze for time-starved ambitious business owners to successfully navigate;
- The rise in a range of alternatives has got people’s attention, yet banks are still viewed as the primary source of, and route to, finance for most ambitious business owners;
- The “financial maturity” of the business and the willingness of owner-manager to let go, or accept restrictive covenants or personal guarantees, is a key enabling (or limiting) factor.
Drawing upon experience
At a recent seminar I attended, a panel of finance experts brought out the following observations:
- “If you tell the right story, in the right way, to the right people you WILL get finance”;
- It takes practice, effort, courage, a lot of shoe leather and continual learning to get it right – it is very much an iterative process;
- It’s important not to forget about financial benefits that come from “better management of the business” – better relationships and/or arrangements with customers or suppliers can often negate the need for finance in the first place;
- It is important to clarify “why we need finance” by challenging your own assumptions, as it allows for more informed, solution-focussed conversation with funders;
- “You don’t know what you don’t know”, so it is important to consider all options and get advice.
Sources of finance range from:
- The traditional banks
- Outsourcing the transaction finance to a specialist provider (e.g. Pay4 or for services Orchard Funding)
- Specialist localised providers
- Crowd Funding market (e.g. The Business Growth Fund, Seedrs and MonetandCo)
It is essential in the financing journey that you have the right connections with all of these types of provider. The entrepreneur needs to be well informed about these varied sources of finance available to them because it will often be found that:
- Every situation is unique and there is no “one size fits all” solution;
- Personal and business aspirations on future, growth and exit all need to be considered;
- Work needs to be done to create a story and plan to help funders understand the ambition;
- It’s important to understand/compare the mechanics/cost of the various sources of finance;
- Working with an experienced specialist advisor can help save a lot of time.
It is not easy for the entrepreneur to find the time to put together all the required plans and documentation and which is why it is so important to involve your team of advisors.
- Crystal Clarity Consulting – create a robust strategic plan that develops strength within your team and presents a compelling investment.
- Your accountant – assist you in preparing financial forecasts to support your business plan and understand your financing requirements.
- Your Commercial Solicitor – provide legal advice from a full service firm
- Your bank manager – give you an honest feedback on the current feasibility of your finance considerations.
For those of you who enjoy reading more on the topic, I found the following The British Business Bank – the business finance guide a particularly useful source of reference. Who said raising finance was easy!