Growing Your Business

access finance

Money for expansion

The need for more working capital is a common requirement, and one that causes most business problems if not managed correctly. You need to determine whether it is a short term requirement to accommodate stock or debtor variations, or a need for core working capital for business expansion or major equipment purchases. If you need a computer, a flexible alternative to borrowing is leasing or renting equipment.

The bank loan

Although your application for finance cannot succeed without a complete set of documents, you will need to meet the other criteria of a lender. Each financial institution has its own criteria for assessing applications for finance. An example of a basic criteria used by many banks is the principle of the ‘3Cs’: character; cash flow; collateral.

Do not call the bank to make an appointment to discuss a loan unless you are clear about:

In many instances applications for finance fail because the potential borrower has not presented sufficient information to enable a lender to understand the intentions of the applicant, and the viability of the business venture.

Debt and equity finance

There are two types of finance, debt and equity. In most cases small business operators seek debt finance.

Debt finance is money borrowed by the business, usually from an external source, but it can also be a loan from an owner of the business. Debt finance (borrowings) is the most common way a small business owner seeks to raise additional funds. Equity finance is capital provided by the owner (internal) or investors (external/internal) into the business.

Documentation

Whether raising the funds from a bank, a financial institution, or an investor, you will need to take the time to put detailed financial information together. The lender(s) will consider the risks and base their decision on the information you present to them in writing.

 

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