6 steps to get your business ready for finance

How to get your business finance ready

So, you’ve decided to look for funding for your business. It’s an exciting step, which can really take your business to the next level. But it can be daunting too.

How do you know whether you’re getting good terms? Is your business ready now, or would you be better off waiting a little? These are big dilemmas, and the way you approach them can make a huge difference – to your credit, the terms available, and the impact on your business.

Well, we have good news! There are steps to help your business to prepare. With a little planning, you can give yourself the best possible chance of a smooth application process. And that’s what we’ll be covering today.  

At Hexa, our goal is to make finance simple. From our base in Newport, Wales, we’ve helped thousands of SMEs from a wide variety of sectors achieve growth through financing. Today we’re advising on how to take those first steps. And since we’re called Hexa, it’s only right that we break it into six steps!

1.    Tell your story

This may sound more like marketing than financial advice. But there’s some crossover here. You’re presenting your business to people who don’t know it. You need to make them believe in you and what you’re doing.

It’s worth thinking about some basic questions. What’s your unique selling point? Why did you start the business? What’s your vision for the future? What are your goals? What are your passions? Why do you believe in your business?

Of course, loans and grants are about more than this. Your accounts matter too. But a clear vision of what you are will always help. It’s also worth documenting what personal investment you have made in your business as well, as that shows commitment to other lenders.

2.    Decide what the finance will do for your business

Next, some fundamental questions about the finance itself. Businesses seek financing for everything from cashflow to asset purchases. So what is it funding? What will the benefit be to your business? How will it deliver a return on investment?

This is about clarity. Let’s say you’re looking for asset financing – in other words, funding to invest in a piece of equipment. It could be anything from a van to tools or equipment. The next question is how it helps your business. Will it make you more productive and profitable? If so, that’s a great start!

If you’re clear about this, it will make you look more credible. Not only that, but it will make it easier for you to explain your case to your funding partner.

3.    Decide what level of funding you need

Two questions here: how much funding do you need? And how long do you want the funding over? These may seem straightforward, but they’re big questions that require careful thought.

Why? Because too much or too little can be detrimental in different ways. If you take more funding than you need, you’ll be paying back more interest. And if you take too little, you won’t have enough additional funding to realise the benefit you need.

It’s the same with the terms of the borrowing. If it’s too short, you may not be giving yourself time to pay it back. If it’s too long, you’re extending a debt you don’t need. It’s not that you can’t overcome these problems – but if you follow these steps, you might not have to face them!

The good news is that the previous step will help with this one. If you’re clear on what you want to fund and why, it’s much easier to estimate how much you’ll need.

4.    Keep your annual filing up to date  

We’ve covered what you’re looking for and why. Now it’s about what lenders are looking for. Lots of businesses worry about their credit when it comes to financing. These next steps will help with that!

The first thing to check is your annual records. Make sure you’re filing your financial information and business activity accurately and on time.

The reason is pretty straightforward. Lenders look more favourably on sound, stable, well-organised businesses. And up-to-date records are the first sign that you meet those standards. Get this in order, and you’re much more likely to get better terms.

5.     Manage the day-to-day

Annual accounts are milestones marking each financial year. But of course, a lot of accounting happens between those annual filing dates. Lenders also want to see signs of ongoing management and performance.

Nowadays, there are lots of great subscription-based accounting platforms that make this so much easier, like Xero, Sage or Quickbooks. There’s a lot to be said for using one of these, especially if accounting isn’t your forte. Not only will they help with getting funding, but they’ll also help you monitor and forecast your performance.

6.    Tidy up your banking

Next up, make sure you’ve got clean banking records. This may seem simple or even obvious. But it’s as important as accounting, and essential to make sure it’s in order.

This means following your banking covenants, paying on time, and being up-front about how much cash is on hand. What does this prove to lenders? It shows that you manage cashflow properly, and that you’re operating effectively.

Bonus step: Get your personal records in order

We’ve focused so far on your business, from its USP to accounts. This final bonus tip is more personal. For some types of business finance, lenders will want additional security. That means looking at directors, and potentially shareholders too.

Now, you don’t need to be alarmed about this. Even if you’ve got bad personal credit, it doesn’t necessarily rule out finance. In fact, if you’re incorporated as a limited company, your personal credit might not make a difference. Still, either way, there are some basic steps to follow that might help.

The biggest is keeping on top of your own financial commitments as much as possible. But also, make sure you’re registered on the electoral roll, with an up-to-date address. It makes a real difference to your credit rating!  

How Hexa can help?

Funding can really unlock your business’s potential. Whether it’s financing for new equipment or cashflow, it can take a business to the next level. But there are so many types of funding available, and the wrong choice can harm more than it helps.

These tips can help. But a little expert, in-person guidance helps even more! Here at Hexa, we’re experienced finance professionals with a passion for supporting SMEs. For trusted advice on navigating the options, get in touch today.

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