“Budding entrepreneurs are disappointed when they are refused finance for their ideas, but often it is because they have asked the wrong lender or are presenting themselves in the wrong way,” says James Caan, who offers the following tips to small and medium sized enterprises looking for funding:
• Lenders are obviously looking for evidence that a business can afford to pay for the finance it is requesting, so be honest and realistic with them.
• A realistic cash flow forecast is a must. Think seriously about whether your debtor periods are realistic and whether there is flexibility in your projections.
• Speak to your prospective lenders while you are still formulating your business plan, so they can be involved at every stage.
• Know your numbers inside out. A lender will want to see that business owners know their figures and their market.
• Remember, banks provide secured lending. If you have no security or collateral then angel investors, private equity or venture capital may be more appropriate.
“Some banks have reporting that requests for business finance have actually decreased, which is probably due to a lack of confidence,” adds Caan. “But lenders say that often funding is not granted due to business owners simply not providing the correct information or having a tight handle on their numbers. The banks are lending if SMEs can present a strong business case.”
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