secured business finance

secured business finance

Strategies for Securing Business Finance: A Comprehensive Guide

1. Introduction to Business Finance

Business finance as a concept is actually broad-ranging and may include a host of different aspects up to and including credit services and investment opportunities. At the grassroots level, it involves helping start-ups to develop a business idea into a viable business, make focused interpretations of who their potential market really is, and give advice on obtaining sales. While traditional business finance dealt with the payments and transactions used by large enterprises, the present-day practice also focuses on small and medium enterprises (SMEs).

At the initial stages of a business’s life, securing business finance is probably one of the most important and seemingly difficult things to accomplish. Other than a business plan and a clear business model, choosing the right type of business finance is critical to having a successful start-up. This guide is not only your first step to learning about the different types of financing available to your business, but also a comprehensive business finance knowledge tool.

2. Types of Business Financing Options

Long-term financing involves loans that are generally payable over a period of more than five years. They are often used to acquire fixed assets like buildings, land, and production equipment.

Medium-term loans are generally repayable over a period of between one to five years. They are used to acquire assets in the business, including plant and equipment. If your cash flow forecasts are good, you might use it to boost your working capital.

Debt financing involves borrowing money from a lender (like a bank) with the promise to repay at a predetermined rate of interest. This type of financing includes short-term loans, which are generally repayable within six or twelve months. These loans cover operating costs such as wages, rents, and utility expenses, or cover costs and expenses like seasonal stock.

Equity financing is the process of raising capital through the sale of shares, which enables the owner to retain control of the company. In addition, retention of earnings is also considered a form of equity financing. There are two distinct advantages to financing your new business with equity and not debt: as an owner, you do not have to repay the money if there are no earnings, and you do not have to pay interest on the money.

There are two types of business financing: equity and debt. The basic difference between the two is the ownership interest that investors have in the company. If the investor enjoys voting rights and claims to a share in the liquidation value of the business, their investment is considered equity. On the other hand, if the investor has lent money to the company and does not have any ownership interest in the company, their investment is considered debt.

The basic types of business financing can be summarized as follows:

3. Key Factors for Securing Business Finance

Given that business finance is not a legal practice, aspects regarding your business idea will not be appropriate and would typically be ignored. Institutional funders will not lend any significant amount of money on a pure unaudited statement. This does not mean that audited accounts or an expensive accounting package are needed – particularly with start-up enterprises. As the company grows, however, a good set of internal financial controls and detailed cash flow analysis will become increasingly useful and important. There’s a lot more to successful business finance than just raising funds. It is about managing the risk of the business effectively. In the end, a good business finance consulting will focus on showing you how to effectively manage this risk in order to guarantee that you will continue to have a competitive business that can be sold for a higher price!

Having a good idea and the enthusiasm to do something about it is not enough. Long-term good business ideas will be profitable when you can convince the financial backers that their money will be safely used. Some business owners have the ability to secure finance for their business without recourse to external advisors or intermediaries; others will gain significant benefit from the advice of such professionals. Hence, it is important to know in advance about cost and timing of engaging such professionals and be able to relate this to the amount and source of finance required. There are a number of key factors that most institutional funders will look for in deciding whether or not to back your business. It is important to remember that using the services of professional advisors in finance and business does not relieve you of the need to think carefully about the elements involved in raising finance.

4. Best Practices for Presenting Financial Information

Use an established written general corporate information source. The relationship between businesses, their customers, suppliers, other stakeholders and the local community is fundamental. It is put to the test in most funding packages and becomes increasingly important as a relationship model for the management and nurturing of successful growing businesses. Use your business history and corporate thinking when formulating general corporate information, such as mission statements, market segmentations and forward statements, to positive advantage. Such information needs to be natural and straightforward, easily digested by its intended audience. Data analysis is important. When presented in a logical, relevant manner, it can throw light on business strengths, weaknesses, opportunities and associated risks in a way that will provide potential funders with a clear understanding of what may be a sensible and measured course of action.

Once you start to present financial information, the following best practices will help to ensure a successful presentation, whatever the medium or intended audience:

Personal contact with investors and funders is crucial. By meeting them early in the proceedings, perhaps as an exploratory visit, a more common understanding and tailored approach can be achieved. Their concerns can be explored and addressed, personal contacts can also lead to additional, credible references from others, which can be useful in gaining the confidence of potential investors. Use a variety of information sources, businesses and advisors to ensure the input is rounded, easily understandable by potential funders and in line with generally known facts on the business.

Unsurprisingly, the elements necessary in a business finance presentation will depend on its intended audience and purpose. Comprehensiveness will depend upon chosen media, from informal in-person discussions to sophisticated computer presentations. Generally, however, most business finance presentations will require the following main written elements:

The overarching aim of a finance presentation is to develop confidence in the business and its ability to meet its growth and profit expectations. The fundamentals of any presentation strategy involve setting clear and specific objectives that are followed up in a timely and professional manner.

Delivering the right financial information to the right decision maker at an appropriate juncture can be a challenge. What to include in a business finance presentation will largely depend on its purpose and the people who receive the information. However, to ensure successful funding for your business, it is important to incorporate general best practices when developing any business finance presentation.

5. Case Studies and Success Stories

Section B Consumer B.1. From Footwear to the Enterprise – Thompson Leather Corporation B.2. Kay Star National Corp. DREDGE B.3. MINDEL GROUP HOLDINGS B.V. B.4. Sims Funeral Services, Inc. B.5. Taste Direct Ltd. B.6. On Line Products Ltd.

Section A Business Services A.1. E-COMMERCE MANAGEMENT INC. A.2. MATTHYS MISS LONDON AGENCY GROUP A.3. SERVICAD INC.

Case Studies by Industry We have selected the following 16 case studies based on feedback from the knowledge sharing sessions. The types of transactions presented are not only popular but also innovative in their respective markets. The ISP and telecommunications case studies are two new sectors added to the guide. Our goal is to include case studies of every sector highlighted in our share it! Gallery.

5. Case Studies and Success Stories Each financial partner is different. One bank, equity, or mezzanine investor is not the same as another in financing a similar transaction. This is the reason why developing new strategies and finding creative financing solutions is so important. The partners and transactions highlighted in this guide are illustrative examples of trends and unique solutions. They are not the solution. The art is to outline the problem and then to create the ad hoc solution or find a partner prepared to work with you.

Introduction These case studies provide practical examples of specific business financing strategies. Each case study includes a summary, the approach taken, the target market/sector, financing type, cost, terms, and benefits for each case. The order of these case studies is companion for use with the knowledge sharing sessions. The share gallery references for each case study is noted following each description and the actual case studies are located at the end.