Partner Article

Making a successful application for funding

David Beaty, Commercial Director for the North at HSBC looks at how SMEs can prepare themselves ahead of appyling for funding.

While there have been reports that some businesses are facing challenges in accessing finance, the reality is that there is funding available for strong, forward thinking businesses. In fact, HSBC has recently announced £4 billion worth of funding to support ambitious businesses in their growth plans and encouraging economic growth through international trade.

Trading internationally can present great opportunities for business growth and HSBC is keen to support businesses making the transition to overseas ventures. The Global Trade Forecast, which HSBC issues quarterly and predicts overall trade growth both globally and for individual countries, anticipates that the UK’s trade will grow 60 per cent by 2026. This presents significant opportunities and businesses need to think about potential funding requirements now, in order to make sure they have the right finance in place to play a part in driving this growth.

So what should businesses do to make sure their application for funding is successful? The six key areas to consider are:

• Consider your capital base: Ensure that your business has an appropriate capital base, appropriate to both thebusiness type and size, and relative to the lending request being made.

• Build a strong business plan: A business plan should contain information on where the company is now and where you want it to be in five, 10 and 15 years time, detailing how you anticipate getting there. Make sure that your business plan is up-to-date, including historical performance and key figures and trends.

• Make sure budgets and forecasts are realistic: Use last year’s figures as a guide and share forecast information with other key budget holders in your business to ensure accuracy and avoid over/under estimation. When forecasting, review how your products have sold so far and consider economic factors, such as changes in the market and how your competitors are faring. This will help you to make a more accurate forecast of future demand and budgets needed to support it. Banks will expect to see forecasts for the next three years, so demonstrate that you are forward planning.

• Look after your cash flow: Demonstrating that you have good cashflow management skills will prove that you are able to cope with any unforeseen expenses or delays in payment.

• Have a clear rationale: Be very transparent about why funding is needed and how it will help your business to grow. Include your growth expectations for the business and show how you have come to your conclusions by citing thorough research and history of your company.

• Seek professional expertise: The lynchpin of accessing finance is seeking professional advice. Having a strong working relationship with managers at your bank is a good starting point as they will have unrivalled knowledge helping businesses to access finance and can support with creating strong funding applications.

Thorough planning, research and forecasting will help businesses to create a strong case to access finance. Sharing this information with a trusted adviser will also give businesses additional confidence in processing an application for finance.

This was posted in Bdaily's Members' News section by Tom Keighley .