If you’re actively growing your business, then it’s a given that you will need to gain access to some sort of external borrowing. In fact, it’s something you’re likely to have to go through many times over the years as your business develops and matures. Put simply, as your business grows it will face different challenges and your reasons for seeking finance will evolve.

As you develop your business you will need to organize it, and yourself, to make a winning application for funding. Here are six ways in which you can prepare or finance.

• Research your audience
• Assess your assets
• The benefit of a robust balance sheet
• Review your cashflow
• Prepare staffing requirements
• Undertake succession planning

Research your audience

With each different funding application comes a brand-new audience. You need to be in a position to present your business in real-time, every time with a view to getting access to the right lenders.

Ahead of any effort to obtain funding you need to have a robust and sustainable business plan. It should outline your proposed finance journey in order to persuade lenders that you are worthy of investment. As the owner of an SME you are likely to get so caught up in running the day-to-day aspects of the business, so some of the planning, strategy and formality can go out the window.

The challenge is that, whether this is your first or fifth funding round, there are a number of considerations that you need to make in advance to ensure your business is ready to access funding every time.

Assess your assets

A good starting point is to assess your current assets to identify if there is anything you can leverage in order to free up funds internally, even if this is simply for speed and based on a short-term solution.

One viable option is the balance of any current outstanding invoices, particularly if the challenge is an interim cash-flow problem. Using invoice factoring and discounting, means that you can sell your invoices ahead of them being settled by your customers, creating a good cash influx in a short space of time.

This type of finance can provide a great quick fix. It can be accessed more than once, but depending upon the bigger picture, is unlikely to provide a sustainable, long-term solution.

In most cases, something more substantial, and enduring, is required to support the wider growth ambitions of your business. This inevitably requires further planning and your current financial position is something to get in order as early as possible.

The benefits of a robust balance sheet

Investors will be interested in a healthy positive balance sheet and a robust set of profit and loss accounts, whatever stage your business is at. They don’t necessarily need to see you making a profit at the point of seeking funding, but they do need to see the potential for this in a relatively short space of time. As well as your potential for profitability being an indicator of your business’ sustainability, it will also provide reassurance of your lenders’ likely return; they are in it to make money just like you.

Creating a strong financial model will pay dividends, especially if you can demonstrate a number of likely scenarios to potential debt and equity investors. The ability to highlight different levels of return from different sources of capital will not only demonstrate flexibility in your business, but reassurance that you are prepared for a range of outcomes.

Review your cashflow

During your financial review, you must also pay attention to your cashflow. Cash is king and investors see the health of your cashflow as an indication that you could deal with unexpected problems and take advantage of new opportunities. You should be in a position to prepare a cashflow forecast for at least the next 12-18 months to demonstrate that you are running a sustainable operation; a solid 5-year business plan is irrelevant if you can’t pay the salaries next month.

Safe in the knowledge of your current financial position, investors will quickly divert to cross-checking its sustainability. Realistic growth plans are a must and should be based on both market demand and a strong sales pipeline. If you are a start-up, the emphasis will be on proving the need for your product or service, if you are an established growing business, your focus should be on diversification and product development plans.

And to implement the required growth needs, you will need to have the right people in place, at all levels of the business. Whilst investors are more than willing to support family businesses, they will scrutinise the team you have in place. The challenge can be in demonstrating that your focus is on business and not family and that the team you have in place are there on merit rather than emotion.

This is particularly relevant to the management team that you present to investors.

Staffing requirements

It makes good strategic sense for SMEs to plan ahead and take on employees, directors and/or advisors or consultants to ensure you have the right skills and qualifications for specific roles. This demonstrates continued professionalism, as well as an appetite for growth.

As an aside, equity investors, in particular, will have a vested interest in the day-to-day running of the business. Showing an openness to external influencers such as consultants will stand you in good stead when approaching potential equity funders.

Succession planning

And then there’s your succession plan. Even though this should have been in place from the outset, you will need to review it in line with your current funding bid. Investors will be keen to know what your exit plans are, specifically how and when you are intending to hand over the reins. You will need to make sure that your succession timeframe aligns with your growth strategy and that you are able to fulfil your investor requirements within that time.

Any succession plan that is in place needs to be financially sound for the business, as well as investors; they are there to be challenged and adapted. It’s ok for them to change as the business grows.

The key to success for any SME is in the ongoing planning. Make sure you are true to your goals and allow for the time to map out your financial journey at every stage of growth.

Click here for information on successful business planning or contact one of our experts.