As you endeavour to grow your business, it is inevitable that one shall encounter the need to get funding; be it short term funding in the form of order finance or long term loans to purchase fixed assets. Whereas many tend to wait until this becomes a pressing need, it is wise to plan ahead and position yourself well beforehand. This might even prove to be a lifeline when your business faces challenges in the future. The following are tips to prepare your business to get funding.
Keep proper records.
This means recording each and every business transaction as well as keeping the supporting documentation. All this should be done whilst adhering to good accounting practices. Where possible, engage auditors to verify and validate your accounts. This will come in useful when seeking funding because it provides track record of your progress as well as an impression of the size and scale of your operations. This will also be useful in showing whether your business genuinely needs external funding or not.
This means being proactive and creating partnerships well beforehand, with entities and organisations that could avail funding. You can start by opening a bank account, attending functions or participating in charity events. It is easier to lend to someone you know and the same concept applies even in this case. Where you have done good business and a client has expressed their satisfaction with your product or service, request a testimonial. This will also help in presenting you as a reputable and trustworthy business.
Prove your business model or concept.
Experience is the best teacher and it works in your favour when you have an in depth understanding of your line of business. Many seek start up loans but the truth is very few organisations are willing to back a business whose model has not yet been tested. Do your research, provide samples, do a demo and start selling or operating at any scale that you can. Keep track of your analytics and leverage on this information to justify your business case. In instances where your business is still an idea, a comprehensive and thoroughly researched plan showing viability, profitability and practicality should be presented.
Build your capacity.
As with human growth, every business goes through the same process of development. Start off with small loans that you can handle and work your way up to the larger amounts. This also applies to the transactions that you take up. This might even mean foregoing certain opportunities that are outside your ballpark and waiting until you have the capacity to undertake it. Start with what you can handle, grow organically and then use this information to buttress your company’s capabilities.
Strengthen your team.
Your team is the people who will be handling all the money and there is a need to make sure that these are competent, mature and reputable individuals. Having in place a team also brings to light a form of support mechanism that will help you in repaying the loan. These individuals should have the technical expertise, the experience, the reputation as well as a sound educational background to suit their respective roles within your business.
Outline your intentions.
Every business needs a plan with objectives, activities, timelines and measurable outcomes. Not only does this guide your actions but it comes in handy when you need to make your intentions known to potential partners. It is important to include your vision, your mission as well as your immediate, medium term and long term targets. Where one might need external funding, it’s important to also highlight the intended use of the funds.
Depending on the amount of funding required, some form of security will be required. This is usually in the form of physical assets and with the Reserve Bank‘s introduction of a collateral registry will soon include livestock and household goods. Where one does not have assets, they can use the payment of the order as collateral if it’s from a reputable organisation. One can also use a relative as a guarantor. It is therefore important to think ahead and start building up an asset base well before the need for funding becomes imminent.
In conclusion, the best strategy is always to plan ahead and prepare in advance. Do not wait until the last minute. I hope you found this article helpful and I wish you the best in all your endeavours.