Fundraising for your business is not always easy and whilst many companies don’t have trouble raising funds to initially get off the ground, seeking further investment for growth is not always as simple. A friend of mine works for Sertant Capital, an equipment finance company who work with many small and medium businesses in helping them to secure additional funding for the upgrading of large scale equipment. Liz works with many businesses in reviewing their proposals and I spoke with her recently about what companies can do to increase their chances of getting the additional investment which they are looking for.
When it comes to lending money, be it from a bank, an angel investor or a specific finance company such as Sertant Capital, it is vital that businesses have their house in order. For this reason it makes sense to perform an audit of the company’s operations and finances to ensure that everything is just as it should be. If any of these things are uncovered during or after investment it can be catastrophic and result in the investment being pulled.
Lenders are not just going to hand over money to a client which doesn’t have a solid plan for the next 5 and 10 years. These plans should be well structured and most importantly realistic, which is why it is essential that they sit down with an accountant or industry analyst to discuss their future plans and be sure that it is based in reality. Many companies massively overvalue their firm or their future prospects and this can result in fundraising efforts falling flat, because investors just aren’t prepared to meet with what the business expects to do.
There has to be some level of progress in the business which it is able to display to potential investors in order to get them on board. Failing businesses who are seeking additional investment are massively unlikely to get it because they can only show how the business has steadily declined. It may be that the reason for this decline was a lack of funding in the business but that would always beg the question why didn’t they seek out investment earlier. The only time that a business such as this may be able to find investment is via a private equity fund, but unless the business has decent prospects even this is going to be unlikely.
Businesses must have a very clear and detailed plan about what they are going to do with the money that is invested. All businesses would like an injection of cash but where and how the money will be spent is one of the most important aspects here.
The point of seeking investment is that a business is able to show that it is a safe investment, it knows what it will do with the money and it has realistic goals and time frames around repayment. Only then can they secure the money which they need.