MT Expert - Finance: How to secure funding in testing times

For SMEs, securing a bank loan can still be tricky. Here are five ways to improve your luck

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Last Updated: 31 Aug 2010

As British politics begins to recover from its recent turmoil, one of the first things on the agenda will rejuvenating the UK’s battered economy, writes Alexander Rosse’s Abhai Rajguru. The general consensus is that small businesses will play an integral part – if only they can get their hands on some investment capital.

More than a decade of economic success (before the recession) has created an entire generation of business people who have little or no experience of securing funding in a tight financial environment. The days of a confident stroll to the bank to casually request funding have passed. You don’t need to be a rocket scientist to notice that the rules of lending have changed. The time has come for a different approach:

1. Swap your entrepreneur’s hat for the proverbial banker’s bowler.
You should be convinced that you have a watertight business proposition, because the bank will seek out the risks within your business plan and cashflow. Write your funding proposition from the bank’s viewpoint.

2. There’s no time like the present.
There really is no time to hang about; the nation holds a limited pot of money and you have to assume that there are many others chasing each pound. Do not waste time reinventing the wheel or you will lose out. Talk to somebody who has been there before - another business leader, or an accountant.  Any decent advisor, with many years beneath their belt, should help you at little or no cost.

3. Be realistic about how you will manage your prospects and risks.
Get to know other business directors and then develop honest relationships, where weaknesses can be discussed and ideas shared. Encouraging free discussion in this way compounds the experiences of many and helps strengthen your business model and its processes. Your credibility and reliability is as important to the bank as it is when approaching potential customers and closing sales.

4. Be prepared.
Skimp on preparation and planning and you may blow your chances with the bank. Ask for money as early as possible, making it clear that you understand the type of funding you need – debt, equity or something else. Your business plan and conversations with the bank should create a ‘no surprises’ environment. Do not approach a bank until your plans include detailed profit and loss figures, balance sheets, and actual/ forecast cash flows. If running your business according to your plan generates surprises, do something about it immediately, to maintain the bank’s confidence.

5. Prepare for a love-in.
Build a relationship with your bank and keep them engaged. Treat it as a partnership so both parties feel secure going forward.


Abhai Rajguru, chairman of Alexander Rosse

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