Most businesses encounter very early in their journey the difficulties of accessing finance. In most cases, budding businesses give up on the financial institutions prematurely. The call centre experience, the cold corporate communication style or even a perceived lack of experience or maturity of the person dealing with your case can be enough to put you off. Particularly if you are a specialist operating in none mainstream industry.
This does not mean that they cannot help. Most financial institutions or investment organisations have good provision to deal with all business types and are not often surprised. They have been doing it for a long time. I know it might come as a surprise but banks want you to succeed! Their business model and profits are based on your success. Their job, when approached for finance, is to identify risk and to aid you to improve your viability so you can all make money.
In many cases the client company may have a misguided impression of how financiers and finance providers evaluate or assess worthy projects and causes.
So, here’s 6 tips to help you onto the right track for raising bank finance. (There are no guarantees but they might help to tip the scales in your favour…)
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1. Meet your Manager. Find out who your local bank business manager is, make and appointment and meet up for an initial chat. Discuss your intentions, get a feel for the process and listen. You have done three important things here.
a. You will understand how to make an application
b. Be able to gauge their expectations and
c. Hopefully you will have started a valuable relationship with someone you want to champion your cause internally (with the credit risk team) when the time comes to submit your application.
2. Understand the Criteria. Understanding how your business will be assessed and develop a viable business plan that is easy to read is essential. This might sound obvious but bank managers get a lot of applications and have limited time to read them so help yourself by helping them.
3. Keep it Succinct. Be careful not to get carried away with too much detail in your business plan e.g. technical detail or page after page of market research appendix. They only need the facts and a convincing financial case. A typical business plan is between 8 -15 pages (excluding supporting data).
4. Justify your sales forecast. Make sure your sales line/s on your financial forecasts are explained properly. Outline how you have arrived at your conclusions and what formula you have used to calculate your income expectations. This is often the weakest link in most people’s business plan but probably the most important.
5. Demonstrate industry knowledge. Banks do not need to understand the depths of your industry. That is your job. They just want to know if you can demonstrate that you are capable of running a viable business or project. So show them!
6. Know what the money is for. The types of considerations that banks and other financing organisations will consider are Capital purchases (hardware or machinery), Revenue costs (professional services e.g. marketing, design, and accountancy). Other inclusions can be for operating capital or project cost for day to day management. For projects a clear plan of the return on investment needs to be presented. Unfortunately it is rare that finance is provided by any source to a start-up venture for stock or consumables.
For business support & grant funding to assist your business to grow call us on 0844 887 2568 or goto the NBV website on http://www.nbv.co.uk
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