A survey carried out by The Federation of Small Businesses found that 41% of businesses had used personal savings to fund their business, with a further 43% using overdrafts and 21% using credit cards to fend off the effects of the recession.

With so many businesses now looking for external financing, we thought it would be worth going through some pointers to help ensure your application is successful:

1) If you’re going to the bank to ask for a loan, make sure you have all your ducks in a row! Every bank manager we talk to stresses that the banks are willing to lend but they aren’t prepared to lend to a very risky proposition. And the same goes for other lenders and investors.

So as a starting point, make sure you have a credible business plan which covers the main aspects of your business – our One Page Plans are an ideal starting point. This shouldn’t be ‘War and Peace’ but it does need to cover all aspects of your business and should include profit and loss forecasts together with balance sheet information. And make sure you include how you’ve calculated your forecasts – any savvy investor will soon spot if your business plan is more fairy tale than reality.

2) Think about having your business plans and proposals prepared by a third party. This can often make your proposition far more credible and therefore help you enormously in your endeavours to get that much needed cash.

And this also gives you a much needed realistic view of your plans. It’s very easy to get enormously attached to your business plans and believe that you can achieve your objectives against all odds! A can do attitude is great but needs to be tempered with a healthy dose of realism.

3) Don’t forget to include cash in any forecast or plan which you prepare. An investor or lender will be interested in profit but their main concern will be how you’ll pay them back. You’ll only be able to do this once the cash starts rolling in.

Remember the expressions: ‘Turnover is Vanity but Cash is Sanity’ and ‘Cash is King’.

4) Whether you’re a new business or an established one, make sure that you can show the lender or investor how you’ll stay on top of the numbers after you’ve received your loan. Our ‘Performance Measurement and Improvement’ system is designed to do just that.

And if you’re an established business make sure you take along the management accounts and budgets/forecasts you use in your business to show that you really do know how to stay on top of the numbers. Again, make sure any forecasts you prepare include realistic cashflows which you can show are prepared on a regular basis.

Showing you are in control will position your business as a safer investment.

5) If you’re having problems getting financing from the banks, think about other sources that you can approach or other means of helping your cashflow.

For example, you could factor your sales invoices – a practice which is becoming far more common and doesn’t have the negative connotations it used to have! Or consider approaching social lending marketplaces or business angels – there are some particularly attractive tax breaks for willing investors at the moment, though you must be prepared to give up a stake in your business.

6) Get a sounding board.

It’s difficult running a business – especially if you’re running it alone. Having a third party to help focus you and to provide a balanced viewpoint and a challenge can make a huge difference to your business. That’s why our ‘Boardview’ service is so popular and successful.

7) Last and by no means least, think outside the box. There are far more options available from your bank than just the traditional term loans and overdrafts. In addition to their own capital, banks can tap into government guarantees (the Enterprise Finance Guarantee) or funds from the European Investment Bank (EIB) when lending to small businesses.

Because the bank is sharing the risk with a third party, they are often more willing to lend than they otherwise might. But be aware that these alternative products might not be as well known as you might hope – so make sure you ask about them and are quite insistent in finding out about them.

But the good news is that there is funding available for the right type of business. You just need to make sure that you give your business the best chance of success!

Spread the word!

Why Friendly

We work with businesses and contractors/freelancers who want to embrace the world of online software and the benefits this brings. Using technology to help our clients is at the core of everything we do.

So if you'd like to find out more, just give a call or drop us an email - no hard sell.

Just friendly, professional advice!

Who we are

We're a small team with over 50 years experience of working with small businesses.

So we're in a unique position to understand the challenges that you face every day in your business.

And what's more, we're fully professionally qualified so you can be sure that your affairs are in safe hands.

Copyright 2016 by TFA Accountants Limited