Posted on: May 20th, 2019
Whether a strong company or a venture stage business, business finance is the lifeblood of corporate growth and renewal. Yet too often, companies don’t prioritize capital access as a core competency. Rather than treat it on a level with other important in-house functions such as R&D and sales, most companies lack a business finance team. The function is often left to the CFO or the owner and their extended network of contacts.
For companies in need of only episodic capital access, this approach may work. But for companies on the move, access to business finance is a perpetual need, and businesses are well served to focus internal resources on it. Raising business finance involves an alignment of capital supplier with business type and deal structure. Every successful business finance arrangement is a formed through effective relationship building and lender education. Businesses have to articulate their strengths and their growth opportunities in a clear, objective and persuasive manner.
Additionally, they need to convey best practices and professionalism, showing the lender they share the same standards and business language. Communication tools and frameworks are helpful to educating the lender, accelerating their ability to fully understand the company. Rather than be defined solely through financial statements, companies that frame their own story and prepare their own Confidential Information Memorandum, usually excel in raising capital. Here are 4 keys to ensure you win at raising your business finance.
- Understand deal structure options – most companies have a bank-centric view of deal structure which clouds their view of all of the options in the market. Your capital need can be satisfied in a variety of ways through several different types of lenders. Learn what’s available and the strengths and weaknesses of each approach.
- Elevate your Pitch – The presentation you used a few years ago is probably no longer adequate to describe your current business and growth opportunity. Take the time to granularly explain the business model. Invest in a professionally written Confidential Information Memorandum, which will drive investor interest in your deal.
- Work with an experienced advisor – the business finance market is a large ecosystem with many major and minor segments. It requires an expert to sort through and bring you the right lenders. Advisors will help you create the right capital plan for your business.
- Focus on capital availability & flexibility – Most companies need extra capital along the way, to get to the finish line. They also need support from their capital providers when they miss numbers. Look for lenders that give more capital than initially needed, and offer a more flexible loan structure. Your success will likely require more capital and more time, so the flexible lender is worth his weight in gold.