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‘Gaining finance is about being prepared’

Business owners seeking to secure finance in a bid to stimulate growth in their firms should, as the boy scout motto says, be prepared, according to Carol Cheesman the principal of Cheesmans Accountants.

There are a number of key steps a business preparing to secure finance should follow, she said.

The first is to create a detailed business plan which should include what the company does, its main competitors, who owns the business and what their expectations are.

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It should also delve into the historical and projected financial results of the firm, and detail what could go wrong and how to minimise this risk.

Ms Cheesman said: “Do it yourself – don’t delegate. It can involve some tough soul searching, but when you’ve finished, your business’s strengths, weaknesses and trigger points will be even clearer. Tough questions from potential funders become much easier when you know what you’re talking about.”

The second step involves identifying the most appropriate form of finance for the business.

If the company requires equipment, a medium-term loan or a hire purchase agreement, could be a suitable option. An overdraft, invoice discounting and factoring could also be suitable options Ms Cheesman said.

For property developments project, finance that can be drawn down at key stages of the project should be considered, according to Ms Cheesman, adding that a medium-term investor could be a good choice for undercapitalised firms.

“Whoever your potential funders are, they will need to understand why you need the money. They will want to know how the funds will be spent, what contribution you and the company are making, and (if appropriate) how the money will be paid back and over what period,” Ms Cheesman said.

Business heads should also consider a host of key questions in their preparation, including what they need the money for, how the cash injection would benefit the company and whether the firm would be able to afford the capital repayments.

The cornerstone of any funding process, however, is the accounts. “They are the core of your business plan and the heart of your goals and ambitions. A potential funder will always want to see an established business’s track record. For start-ups, detailed projections are necessary.”

Anna Sofa,t founder of Addidi Wealth, based in London, said: “I think securing finance is vital for the growth of a business. It is very rare for a business to develop further by simply reinvesting the capital which they have generated from profits.

“No investor is going to take you seriously, let alone invest in you if you do not have an up-to-date business plan, so preparation is key.”