Partner Article

Top Tips for Seeking Alternative Finance

Prime Minister David Cameron has described entrepreneurs and small businesses as ‘the lifeblood of our economy’. More than talk, he has demonstrated his government’s commitment to supporting their growth by establishing the new British Business Bank and its flagship ‘Help to Grow’ scheme. Alongside this, bank referral legislation should improve SMEs’ access to alternative finance. However, questions are already being raised over the likely structure of this scheme and its implications. After all, if SMEs are only referred to alternative lenders after they have been refused a bank loan, doesn’t this suggest these platforms are more lenient with funds?

The answer of course is no. While alternative finance platforms are not bound by specific measures and requirements of business collateral as banks are, it is still within platforms’ best interests to provide investors with the most viable opportunities possible.

This means that small businesses approaching alternative finance providers should be ready for thorough vetting. To prepare, business leaders should be aware of a number of factors that will influence a potential investors’ perception of their business:

1. Financial robustness

Investors need to be confident that they’re going to get their investment back, and clarity in the company’s financial transactions and historic performance is key to building this. Providing a thorough analysis of year on year revenue, profit growth, and the factors that have caused these is crucial, as is a realistic assessment of whether they are sustainable.

2. Availability of information

While audited company data is key to demonstrating company strength and security, so is addressing any negative points early on. It’s vital to be honest and transparent. Succinctly detailing past business weaknesses gives the opportunity to demonstrate awareness of potential flaws. This will also give investors confidence that the management team is straight-forward to deal with.

3. Be realistic

Any business plan presented should be realistic and sufficiently detailed. A budget where every item is rounded to the nearest £500,000 suggests sloppiness and will set off alarm bells for any potential investor. Similarly, it is essential businesses provide up to date information. If the company in question has been trying to raise money for some time, it gives no confidence to see a presentation that is dated six months ago.

4. Expertise and commitment

Potential investors want to see a proper management structure with demonstrable expertise in the business. Directors and managers must be focused on the business and they should not be paying themselves excessively. Moreover, SMEs should consider bringing good quality external advisors or non-executive directors on board, as their presence will help build investor confidence in business decision-making.

5. Presentation

A good website, a neat presentation and well-organised accounts can set you apart. Don’t underestimate the importance of the small things such as having a company e-mail address and professional biographies. Just like turning up to a job interview appropriately dressed, it won’t make you a more capable candidate, but will indicate the importance you place on the occasion and opportunity offered.

If you’re a business in need of funding, you can find out more about how we can help meet your requirements here: https://www.ukbondnetwork.com/businesses.

This was posted in Bdaily's Members' News section by Ben Cohen .