What information will I need and what issues must I be aware of when presenting to financial providers?
When looking to raise finance whether it is from debt, equity or a mixture of both it is important that you are well prepared and seek professional advice before meeting with investors. There are so many different types of finance and deciding on the right mix to suit your business needs can be challenging. A corporate finance advisor can assist in providing you detailed knowledge of the funding market, the potential sources of finance and current terms of lending.
The backbone to any fundraising is a good business plan. There is no such thing as a standard business plan, your business is unique and the plan should reflect that. The purpose of the business plan is to sell the opportunity to the potential investor without elaborating the truth; it should portray a careful balance of strengths and weaknesses, with action points to prevail the weaker elements of the business. Unrealistic assumptions on proposed market penetration will reduce the credibility of the proposition.
Your advisor will provide you with a list outlining the main contents of the plan which will broadly include details about the business, its operations, its products or services, its customers and markets, its financials, what the proposed funding is for and how much is required. If you are looking for equity investment, venture capitalists will look for details on return on investment and exit strategy as well.
Debt providers will need to find comfort in the financial performance of the company so you will need to demonstrate how the business can service capital and interest repayments on any lend. In the present climate, security is everything and many institutions are requesting personal guarantees as well as debentures over debtor books and security over any unencumbered assets.
When approaching equity investors ensure you have a good understanding of the sectors they invest in and that your business meets their investment criteria. Equity investors will be looking to make a suitable return on their venture so it is imperative that you get buy-in to your business model, have a strong enough management team to deliver the proposition and have an ultimate goal to achieve an exit for them. Additionally, they will want to establish your own personal commitment to the business, including your financial contribution which typically should be equivalent to at least one year’s remuneration.