Top tips for financing your business

Access to finance is vital for growing businesses of all sizes. Whether you need to manage cash flow, buy time to make adjustments or fund growth, if your business is seeking finance then it is important that you present yourself, your business and your requirements in the right way. This will help increase your chances of getting the finance that suits your businesses needs.

1: What do you need the finance for?
Think carefully about what you need the finance for. Is it to thrive or simply to survive? Consider whether you need finance to fund expansion, for example, taking on a new commercial property, hiring more staff or buying equipment. Or perhaps you simply need to operate more efficiently, or alleviate some short term pressure?

This may sound obvious, but this determines the type of finance you need and will help you decide what you need to apply for. Businesses often make the mistake of applying for the wrong type of finance that doesn’t address their specific needs. In addition, consider the amount you need to borrow and support your figures in your business plan. Too many businesses ask for too much or too little without working through what they really need.

2: Look at all your options.
Many business owners go straight for a commercial loan before exploring other options. This is not the only way to fulfil your finance needs and in some cases it may be the wrong option for your business. There are a number of different sources that businesses could consider.

If your objective is to improve your ongoing working capital and cash flow position, then invoice financing – using your sales invoices as assets against which money can be borrowed – could work for you. Or you may want to expand your business and invest in more machinery, at which point asset finance would be far a more suitable option.

If you are an early-stage business with high growth potential or an established business looking for funding to expand significantly, consider Venture capital finance and Angel investors. They will own a slice of the business and in some cases act as mentors to nurture their investment and ensure its success.

Remember to ask for a quote rather than make unnecessary multiple applications for finance from various providers. Large numbers of applications might trigger a warning to lenders as it is one of the signs that an applicant may be committing fraud or be in financial difficulty. As a result, large numbers of searches, when present in conjunction with other risk factors, can trigger fraud investigations or affect your credit scoring and your ability to obtain credit.

3: First impressions count
Nearly two out of three businesses are not aware of what impression they are giving to others in the business world. The information you provide on your application form is not the only information that will be considered. Lenders will consider your cash flow, revenue, credit history and may also look at not only your businesses credit score, but potentially your personal credit score as well.

Your credit score plays a key role in the decision making process for many businesses and lenders offering credit in the UK. They use it to help them assess whether your business is a high or low lending risk. Get a copy of your credit report and see what lenders and other businesses are seeing about you when considering your application.

4: Look for the right help and expertise
Using a broker to source the right lender and the best deal for you may help to expediate the process. Look for someone who can offer a wide choice of solutions and understands the needs of your business. A broker will search through masses of companies to find you the most affordable deal that also ticks all your boxes.

If you do choose to use a broker, make sure that they have a wide choice of lenders with a good range of finance options. Make sure they fully understand your business, your needs and your credit profile. The size of your business, the sector it operates in, the region it is based and its financial health, are all factors that could influence the kind of finance or finance provider you should be considering.

5: Don’t panic!
If you are initially refused funding there may be many possible reasons. It may be that you don’t have a credit history yet. Credit reference agencies can help you review and understand your credit score, as well as the steps you can take to become more credit ready. Improve your chances of success by checking your credit score in advance of applying for funding to ensure you are in the best possible position to achieve your goals.