When businesses begin looking at funding, the first question is often: “What finance options are available?”

It is the natural starting point, but it is not always the most useful one.

A better question is “What is the business trying to achieve, and how could funding support that objective?”

For many members, the issue is not whether funding exists. In many cases there are more routes available than businesses may realise. The real challenge is understanding which option is appropriate, what information a lender or funder will expect to see and whether the proposed finance genuinely fits the business need.

Funding may be required for a range of reasons. A business may be investing in new equipment, managing working capital, purchasing or refinancing property, supporting expansion, covering a short term cash flow gap or restructuring existing commitments. Each of these situations requires a different conversation.

That is why preparation is important.

Before approaching a funder, businesses should be clear on the essentials:

  • What is the funding for?
  • How much is required?
  • When is it needed?
  • What difference will it make to the business?
  • How will funding be repaid?
  • What evidence or information is available to support the request?

A funding application or conversation is usually stronger when the business can clearly set out the purpose, context and expected outcome. It also helps avoid a common mistake, starting with a finance product before properly understanding the business objective.

For example, a short term cash flow pressure is likely to require a different approach from a long term property purchase. Funding for growth will also be viewed differently from funding needed to manage trading pressure, The purpose, time frame and repayment route all matter.

Being well prepared does not guarantee that funding will be approved. Each funder will have its own criteria and each case  will be assessed on its own merits, However, preparation can make the process clearer, more focused and more productive.

Takeaway:

Before asking what funding is available, take time to define what the business is trying to achieve. The starting point should not be the finance product. It should be the business objective.