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Opinion: How to improve your chances of securing business funding

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Written by: Admin | Posted 11 May 2018 10:25

Opinion: How to improve your chances of securing business funding

Adam Tavener, chairman of Clifton Asset Management and Alternative Business Funding (ABF), offers his advice to business owners on securing finance

The number of small businesses looking for finance is on the rise. The latest SME Finance Monitor found the proportion of SMEs planning to apply for finance increased from 10 per cent in the first quarter to 14 per cent in the final three months of 2017.

To help your search for finance, the first step is to really understand how commercial lenders evaluate whether you and your business are a safe bet.

Your personal circumstances, track record, business plans, purpose of funding and relative affordability will all impact the availability of funding.

Take your track record, for example. Lenders will evaluate the previous results of an existing business. With a start-up, they will ask several additional questions.

These include: do you have any experience of the field you are entering? Can you point to a strong, relevant skill-set such as sales, management, or technology? Have you run businesses before? 

Turning to the purpose of the funding, being clear what types of finance match your requirements will save you a great deal of time, and possibly money. Your bank can offer a wide variety of funding solutions.

But I would recommend that you compare the banks offerings with alternative business-funding aggregator sites.

Read more: Opinion: What can we expect for pensions during this tax year?

A relatively new phenomenon (think ‘GoCompare’ or ‘meerkats’) these sites allow a business owner to enter their details and requirements quickly and safely to build a picture of your business and give you a snapshot of the funders who would be willing to lend to you.

In a few seconds you can whittle down a universe of over 100 lending products into the most appropriate four or five, and then establish contact with those funders if you so wish. 

There are also many national or local government-backed initiatives to support SMEs. The most well-known of these is Start-up Loans, backed by the UK government.

It is aimed at small scale start-ups, with a maximum deal size of £25,000. Local government also has a range of activities in this space, often teaming up with Community Development Finance Initiatives. 

Finally, if you’re unable to access funding from the routes above, you can consider borrowing from friends and family. A common option, but also one fraught with the highest emotional risk factor as a failure to repay can end up with a loss of a friend, or good relations with a family member.

The usual mistake here is to fail to make it a formal arrangement with an agreed repayment schedule and, where possible, some supporting security. 

If your business is fit for purpose, and you’ve researched all the above options, there is every chance that you will be moving forward with your funding solution to the next exciting chapter of your business.

However, the biggest mistake business owners make, is to feel their search for funding is over when the bank says no, when it is in fact, the start.

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