Navigating Through The Funding Process Successfully (Pt.1)

Working with business owners and entrepreneurs at various stages of pursuing their dream is always exciting and very interesting. As an expert with almost two decades of working in the industry, I come across many scenarios that often leave me thinking, why and how can I best help address the situation positively.

Over my professional working life, I’ve had the opportunity to sit on both sides of the table. As a Risk Management/Credit officer in the bank, where I had the privilege of analyzing and assessing the economic viability of proposals for business loan requests, and also as a business coach, consultant and funding expert, helping clients secure much needed funding for their new business or to expand their existing business.

Meeting new business owners and entrepreneurs is always an exciting time for me, as I get to hear them share their dreams and goals for the business. For those who get in touch to seek funding to expand an existing business or start a new one, I get very excited when they present to me a well written business proposal, which follows a logical argument and makes an undeniable viable case for what it is they need the funding for, and what the potential returns are on the expected investment.

Seven out of ten times however, what is presented often misses out on what I just described above. That makes it a bit challenging, as they often lack the argument and orderly presentation to get through the ‘door’ of the investor(s). Of course, I am always on hand and glad to help to get it in shape before submission to investors for consideration. It makes me appreciate how limited many people’s knowledge is about the entire process. At the core of how I work with my valued and potential clients is, helping them gain clarity of the business landscape, strategize and maximize the opportunities to become more profitable and successful in business.

Interestingly, there has never been a time in history where the business landscape is awash with so many funding options other than the well-known traditional options, such as banks.

The growing popularity of alternative funding options presents a huge opportunity to the entrepreneurial community to secure the much needed funding for their business. However, to access these options requires some level of knowledge and dedication to the process to see it through. According to Fleximize, a UK-based direct funding company and web platform, in 2012 the alternative lending market in the UK alone, was worth £267m. The sector was valued at £1.74bn in 2014, and expected to hit the £5 billion mark by the end of 2015. In the USA alternative lenders lent approximately $3 billion in 2013, double the amount from 2012.

In the latest BI Intelligence report, the US has one of the largest P2P (peer-to-peer) lending markets in the world by loan volume, but the UK’s is 72% larger on a per capita basis. P2P lenders in the US generated $6.6 billion in loans last year, up 128%.

Europe on the other hand is considered to be the next big market for P2P lending. The alternative finance market in Europe is said to have reached nearly €3 billion ($3.9 billion) in 2014, a jump of 144%, and small-business P2P loan volume in France grew almost 4,000% last year, to reach €8.2 million ($10.6 million).

That provides us with the sort of picture of what is potentially available to entrepreneurs seeking funding, to start a new business or grow an existing one.

In this post I am going to highlight two of the six considerations, which are great pointers, in the process of accessing and securing funding for the business owner.

#1 Do I know what I specifically need?

It is obvious you are on the hunt for investors or funds, only because you have a need for it. However, increasingly I find that a lot of entrepreneurs seem to think that any figure, which is often based on a guess work, can be thrown in the mix when asked how much they need.

I, however, think that, if you are really serious about this, you must always put yourself in the investor’s shoes and ask yourself, if anyone comes to me to quote any figures or cash amount, without knowing exactly what it is for and how they came by them, would I even consider it? Your answer is as good as mine. Prospecting for investor support is a serious business and most of them do not have the time to help you come up with what you specifically need, it is up to you to spend quality time and effort to establish that before stepping out to seek their help. That includes both financial and non-financial support.

#2 Do I have a proposal?

You can’t get funding from any serious investor without a proposal. Period! This may seem surprising to some, but I find that quite common. Many entrepreneurs seem to think they can easily talk their way smoothly into winning over investors to support them without presenting a proposal for consideration. I’m afraid, that does not work in the ‘real world’. I am yet to come across any serious investor, who does not require a written proposal, before giving attention to a request. As part of the proposal, you must have an Executive Summary on hand for the initial consideration of investors. Often, it is the first thing they ask for to help them gain an overview of your business and what you are asking for. Advisedly, this should be just about a page summary of the whole business plan/proposal, and not more than two pages.

Equally important is a business owner’s understanding or grasp of the figures, at least the basics, such as, unit production cost, gross margins, gross profits, cost of sales, overheads, net profits, capital requirements, cash flow, both actuals and projections. No matter how much of a phobia you have for figures and calculations, you must learn to understand the basics of these financials, even if you have an accountant who does all the accounts for you.

In Part II we will take a look at 4 more of the six considerations in the process of accessing and securing the funding you need, to start your business or expand your existing business.

Don’t hesitate to contact me if you need help to secure funding or investor support for your business. My network of investors are ever ready to consider your proposal and invest in you and your business.

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