According to a survey recently carried out by GWE Business West, 30 per cent of companies in the region see lack of finance as their biggest barrier to growth.
Neil Higginson from Solutions for Business in the South West, explains: “It is a cliché, but cash is the lifeblood of a business – and when businesses enjoy strong growth, their requirement for funding can increase significantly.
“Finance is available to businesses, but lenders are looking for strong, clearly articulated propositions. They want to be confident that the management team has a product with the competitive advantage to succeed and a cash flow plan that allows them to meet repayments.
“Funding decisions made during these periods can have a fundamental impact on the long-term development of the business.”
Neil highlights the following points that should be considered by businesses looking to raise funds:
- High growth businesses often provide innovative products and services presenting better solutions than established alternatives. There must be clarity in communicating these ideas, supporting business plans with evidence that the new products are well received by the market.
- Highlight the track record of the team. Win confidence that you have the experience and knowhow to deliver the growth performance that you are proposing.
- Find the right specialists to review your business plan and test your ideas – and make sure that it all stacks up. You will be seriously questioned by lenders – make sure that you have carefully prepared the ground.
- It is important that entrepreneurs consider all the options when raising the finance that they need to fund growth strategies. Just some of the possibilities include:
- You might consider lending secured by assets – such as invoice discounting or factoring. This is a very popular funding approach for individuals growing businesses, which essentially involves borrowing money against the invoice value of the business.
- Equity finance is a way of raising share capital from external investors in return for handing over a share of the business. You might approach local ‘business angels’, who are wealthy individuals providing equity finance. Some invest on their own, whereas others do so as part of a network, syndicate or investment club. In addition to money, business angels often make their own skills, experience and contacts available to the company.
It is an area that needs careful thought and planning. To address this need for clarity, GWE Business West has developed Understanding Finance for Business. This new service is designed to help businesses make the right choices and provide practical steps – through an experienced finance coach – to be successful in raising funding. The service is publicly funded by the European Regional Development Fund, and therefore available free of charge for businesses that have the requisite high growth potential.
Find out more about Understanding Finance for Business and how you can access this valuable new service.