Lack of financing is one of the complaints business owners site most often as a reason for their businesses not being able to grow. And they have many stories to share about time wasted in applying for loans or discussing investments. Or worse, they often say that they are not able to find any financier willing to support them.
But is it true that there is a large gap in the small business finance market and that financiers are rejecting worthy opportunities? Or are business owners not positioning their opportunities correctly to show the value financiers may get access to?
Business advisors are often confronted by small business clients who are desperately trying to apply for funding, but are unable to succeed because they have not thought much about the needs, preferences and requirements of the financiers – they are tied up in their own world and often have an inflated belief in the potential of their businesses.
How can you, if you are advisor to such businesses, help them best to prepare for success with their funding applications?
How to help small businesses looking for funding
This is the focus of the upcoming webinar hosted by the Institute of Business Advisors (IBASA) and the Entrepreneurial Planning Institute (EPI). The topic of the webinar is “Key questions to ask your small business clients when they look for funding”.
Attend the webinar to benefit from the insights shared by the panel of small business finance experts and the experiences of other business advisors in supporting their small business clients. You can improve the funding success of your small business clients by learning about the right questions to ask them when they plan to approach potential financiers. In the January episode of the IBASA / EPI Webinar Series, the focus is on the pointed questions you may ask your clients to guide them in connecting with the most suitable financiers.
Join this IBASA/EPI webinar
on 24 January at 11h30
by registering << HERE >>
During this webinar the panel of experts will share less obvious, but very important, questions you may address with your clients when they prepare for finance.
Questions to ask
There are however five very important and very obvious questions that small business owners often skim over, which we can quickly cover here…
1. How much do you really need?
Finance comes at a cost. But in many cases business owners aim to get a cash injection into their businesses for more than what they actually need. They may even end up with cash in their bank account for which they pay excessive interest, juts because they applied for too much funding, or they may be spending money on nice-to-haves to the detriment of their ability to cover the costs of the financing. Limit the finance costs by asking what is REALLY needed!
2. What will the finance actually be used for?
All financiers require a form of financial forecasting to test the feasibility of getting their required return. However, many business owners make the mistake of projecting what they think the financier would like to see, as opposed to what the money will really be used for. As a result, the funds may be transferred at the wrong intervals, based on inappropriate finance costs and without the needed flexibility demanded by changing business requirements. Be clear about the real spending so that the availability and cost of the funds are based on how the money will actually be used.
3. What type of finance is most suitable for you?
The days are long gone of a single option business loan offered by the bank where the transactional accounts are held. Business finance products are varied and geared towards the specific conditions in which the money will be needed. It is very important to match what the funding will be used for with an aligned funding type, so help your clients to consider the available options – from a simple overdraft to a stock-based VC deal.
4. Which financiers are best aligned to your needs?
The finance market is dynamic and always changing, but many business owners assume they know which financiers are suitable for them. They heard about a financier from other business owners, or have had a previous good experience themselves, but tend to close the possibility of following new options. When considering the type of finance, it is important to also consider the type of financier so that their market positioning is best aligned with the needs of the small business recipient.
5. What are the requirements of these financiers?
Amazingly, many small business owners proceed to apply for financing, while they do not meet the explicit requirements of the financier. Collateral for smaller loans is not always a requirement any longer, but a trading history of at least a year showing repeat sales and positive cash flow is a must. Some financiers will also insist on the business owning the premises or have a lease for a few years, as well as other checks to illustrate creditworthiness.
For an in-depth discussion on these questions, as well as the less obvious questions you may ask your clients, join this IBASA/EPI webinar on 24 January at 11h30.
- IBASA members may count webinar attendance to their required CPD points — which is a requirement for maintaining your assessed business advisor designation.