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Getting the right funding for your 2017 business budget
by Peter Fleming

If you are currently planning your budget and looking to grow your business in 2017, will you need additional funding?

Gaining access to additional funding can give your business the growth it needs to get you to the next level. But short of applying and winning an investment on TV’s Dragons’ Den, or Virgin’s VROOM, what are the key steps to successfully securing additional funding?

Before you jump in and fill in any credit application forms, you need to consider what your lender will need to know and importantly for you, will the extra investment enhance profitability and increase the value of your business?

Lenders will look to ensure you have a viable proposition and how much risk is associated with your investment – so it’s wise to spend time planning and getting organised:

• Put together a cash flow forecast

This should be for a minimum of 12 months and three years for larger loan applications. It’s wise to obtain support from your accountant or a business adviser. They will help you sense-check your calculations and the impact on your cash flow in the future. They will also help produce clear projections to substantiate your loan requirements.

• Produce a business plan

This will support your application by showing the lender that you’ve done your homework. I.e. you’ve researched the external market drivers and the competitive market place and you can demonstrate the long-term future outlook and growth opportunities for your business, i.e. this is your strategy supporting the financial forecast.

• Be clear what you will use your funding for and when you need it

Is it just to buy more stock, or to expand your products or services, for instance? It’s also wise to highlight the timescale in respect to when you need to drawdown the funding, as again this can affect loan conditions and interest payments and terms.

• Do your research on funding partners too; as there are many types of funding available, some for larger loans and others if you just require a short-term cash flow facility. Also, note some funding can be available for specific business sectors.

So to reiterate, it’s important to know how you will use your funding and therefore engage with the most appropriate type of funder. Ensure you ask a trusted associate, such as a business adviser, bank manager or your accountant before making a decision. And make sure you do your homework before wasting your time filling in numerous applications.

Packages that keep cash flow positive

From overdrafts to loans, traditionally banks offer a number of packages that can give you access to funding quickly to help improve your cash flow or invest in business assets.

Increasing you bank overdraft for instance, can help fund short-term requirements. While larger business bank loans and independent asset finance lenders can help you buy larger materials needed.

Alternatively, I know of people who have used their business credit cards successfully to obtain additional or competitively priced stock. But remember to be aware of the interest terms if you cannot pay off the full amount within the free period (50-60 days.)

Invoice discounting, is also worth considering if cash flow is your real challenge. However, it’s a good idea to speak to your bank manager or your business advisor for further information on this facility, as it is not for everyone.

Government supported funding for flexibility

There are currently different government-backed schemes available like Funding Circle – a quick way to get funding involving peer-to-peer lending. Businesses or organisations with surplus cash, along with the UK government, put money into a central pot. This can then be lent out to other businesses.

Between £5,000 and £1 million can be borrowed and funds are typically available within a week. The scheme is flexible, offering six-month to five-year loans. You can get a quote, check you’re eligible for a loan and apply online through the Funding Circle website. However, ensure you fully understand any terms & conditions and be aware of the interest charges, payment terms and any default charges before you go ahead.

There are also local business funding and grant scheme providers such as the Local Enterprise Partnerships (LEP) or through local authorities, councils and Chambers of Commerce, so consider doing a little research yourself. A good place to start is https://www.gov.uk/business-finance-support-finder or locally based Enterprise Answers in Penrith. http://www.enterpriseanswers.co.uk/ will carry out this leg work for you.

With grants you don’t pay the money back. However, it’s worth noting there will be clawback terms if you falsify claims in respect to expected outputs of the grant. Therefore, applications need to have a compelling argument and tend to go through a high due diligence process, as businesses need to justify there is additionality i.e. why they need funding. Obtaining larger grant can also be a long drawn process, taking several months in some cases to receive just an offer.

If you are looking to grow your business, Business Doctors Cumbria offer a free business health check where we can help you to set a clear vision to understand the steps you need to take to fulfil your aspirations. Contact Peter Fleming for more information 

 

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