A Month in the life of a Fractional / Portfolio Finance Director

Funding for Growth – What Small Businesses Need to Prepare Before Talking to Lenders

Securing funding is a pivotal milestone for small businesses seeking to expand, invest in new opportunities, or bolster cash flow. However, approaching lenders without adequate preparation can delay the process or result in less favourable terms. Careful planning and organisation can significantly improve your chances of success. Here’s how small businesses can position themselves effectively before engaging with lenders.

1. Define Your Funding Requirements

Begin by articulating why funding is required and the precise amount needed. Lenders will expect clarity on:

• The intended use of the funds (e.g., working capital, equipment, growth projects, or acquisitions).
• How the funding will contribute to future revenue generation or profitability.
• The amount requested and the proposed repayment period.

A well-defined funding request demonstrates strategic thinking and strengthens your case.

2. Organise Your Financial Information

Lenders will closely examine your financial records, making it essential to present accurate and up-to-date information:

• Management Accounts: Profit & loss, balance sheet, and cash flow statements for at least the past 12 months.
• Forecasts: Cash flow and profit projections for the next 12-24 months, illustrating how the loan will be repaid.
• Aged Debtors & Creditors Reports: Evidence of working capital management.
• Business Plan: A clear narrative outlining your business model, market opportunity, and the role of funding in supporting growth.

3. Review Your Credit Profile

Your business credit profile plays a crucial role in lending decisions. Before engaging with lenders:

• Review your business credit report for inaccuracies.
• Settle outstanding debts where possible.
• Ensure all statutory filings are current.

A healthy credit profile enhances your prospects of securing funding on competitive terms.

4. Prepare a Comprehensive Funding Pack

A professional funding pack helps present your business in the best possible light. It should include:

• An executive summary outlining your funding requirements and business objectives.
• Management accounts and financial forecasts.
• Business plan and growth strategy.
• Details of any existing loans or credit facilities.
• Personal guarantees or collateral, if applicable.

A thorough funding pack streamlines the lender’s decision-making process and reinforces your credibility.

5. Identify Suitable Lenders

Different lenders cater to different business needs. Consider:

• High street banks, challenger banks, and alternative lenders.
• Government-backed schemes, such as those offered by the British Business Bank.
• Specialist financing options, including invoice finance and asset-based lending.

Research your options to select the lender best aligned with your requirements and sector.

6. Engage Early and Build Relationships

Initiate discussions with lenders well in advance of requiring funds. Establishing relationships with bank managers or commercial lenders can provide valuable insights and improve your likelihood of securing funding.

How I Can Help

As a fractional Finance Director, I support small businesses through the funding process – from preparing financial forecasts to negotiating terms. If you’re considering raising finance, I can help you get funding-ready and present your business in the best light.

Contact me for a free 30-minute consultation to discuss your funding needs.