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Preparing for Finance

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Before seeking external finance, you need to consider what is realistic in terms of amount, the timescale for repayment and the factors that will affect these calculations. Backers expect you to arrive at the sum you seek through careful planning and rigorous research, so having a plan will help support your case for financial investment. Fundamentally, they want to know what it is for, how long it will last and when you will provide returns.

It is important to be realistic for the stage of development your business is at. For most companies, funding levels tend to rise incrementally from small amounts of debt to more sophisticated facilities (such as invoice finance and leasing) to angel investors, venture capital and public market funding.


Think about:

  • How financial institutions view your sector or industry
  • Your management team’s track record
  • Existing and potential future competitors and the economic climate
  • Your existing debt facilities – the difference between what expansion capital you think you need plus everyday overheads as you grow, and the availability of your existing facility
  • Your asset backing – any assets you can use as security with investors or lenders
  • Vision – it’s important to have clearly defined goals and ambitions for your business


How much should you ask for?

You will need to cost each aspect of your start-up plan or growth strategy. For acquiring a business, it helps if you have identified potential targets and valued the business. To launch a product or service you will need a marketing plan, which includes:

  • Who you will target, assumptions about how
  • How many sales or customers you hope to acquire
  • The medium you intend to use
  • The cost of the campaign or project


Opening or purchasing new premises will require some assessment of the cost to buy or rent in the area you plan to locate, as well as any modifications you will make. If it is working capital you are after, you will need to assess market-rate salaries of hiring staff, the cost of equipment required, or how much suppliers would charge for additional stock.

Ultimately, you may need to temper your ambition. You may have to recalculate if the financier offers you a smaller amount, so it is worth having alternative plans to ensure you don’t lose time trying to raise finance while your existing resources deplete.


Speaking to the bank

Information Gathering

Your bank will want to initially gather information about the business, which will include some or all of the following:

  • Financial statements
  • Management accounts
  • Business plan
  • Financial/cash flow forecasts
  • Budget planner
  • Statement of assets and liabilities
  • Bank statements

This information is needed to build a complete picture of your current and forecasted situation, ensuring that the necessary documentation is available to make an informed and responsible decision. It also helps them to understand how your business would service the finance, to identify the most suitable option which doesn’t put your business at unnecessary risk. 

The level of information gathered will vary for each situation, but key elements include a cash flow analysis, business plan, history of your trading records and a bank statement.


The following can be used as a guide:

  • Financial statements: The latest financial statements, covering at least three years historic trading - final accounts if possible, rather than a draft. If your business is a start-up - do you have financials on any previous business(es) that you’ve run?
  • Management accounts: The latest available management accounts covering the current trading position (since the last financial statements)
  • Forecasts/business plan: Details of your future expectations for the business and the assumptions that have been used in drawing these up
  • Statement of assets, liabilities, income and expenditure: Details of your personal financial position will be requested for most family businesses
  • Bank statements: At least six months of statements (business and personal accounts)
  • Certain requests may require specific information such as estimates, invoices or copies of quotes


Questions and answers

The next step will be to gather additional supporting information, to answer questions such as:

  • What is your business history?
  • What is the purpose of the finance?
  • Does the amount in question achieve the required purpose?
  • What is your personal investment in the business/venture?
  • Is the finance affordable?
  • What is your repayment plan?
  • What impact will the finance have on the business?
  • What security are you able to provide?’


Assessment and decision

The quality of financial and business information provided will impact the decision-making process. The bank will be open and honest about the feasibility of your request and you can be confident that the decision made will be the right one for your business. If finance is refused there should be a clear explanation.

For more information or support on preparing for finance, speak to a Growth Hub adviser.

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