Finding Money to Grow Your Business
15 steps to securing more cash

How many times have you thought of something you’d love to do in your business, and then immediately realized you just don’t have the money to do it?

Lack of available money can be extremely frustrating, especially if you’ve spent many hours analyzing your operations and strategically planning for the future.

In fact, shortage of cash is one of the major reasons business owners are not able to make the changes their businesses require in order to achieve greater profitability.

You may find your business requires financing to:

• Allow for expansion
• Upgrade equipment in order to improve operations
• Provide cash flow while you collect your accounts receivable

The good news is that there is money available to you. The bad news—and you probably already know it—is that obtaining financing is more difficult than simply telephoning your banker and asking for a loan.

In order to help you out during this process, here is an outline of a 15-point process I use in my practice that has been highly effective:

1. Determine how much money your business really needs.

The amount of financing your business needs will impact the type of financing that is available to you, where you should look for this money, and the security that you will ultimately have to provide.

2.  Know ‘exactly’ what this money will be used for.

Will you use it to purchase manufacturing equipment, or to finance an increase in accounts receivables, or for something else entirely?

How you’re going to use the money will impact the type of financing that is available to your business and, more importantly, where you should start to look for money.

3. Ensure you can clearly explain how the financing will benefit your business.

Any prudent lender or investor will ultimately need to know why your business needs the money and how the financing will benefit the business.

4. Understand the different sources of money that are available and determine the most suitable for your business’ needs.

There are many different sources of financing available but they won’t all apply to your business. Take the time to research and understand which sources you should be looking at first.

5. For non-equity financing (debt and leases), be able to explain how your business will service the interest component of the required funding.

All non-equity types of financing will come with an interest cost. It is critical that your business has the cash flow to service the amount you need to finance.

6. For debt financing, be able to explain how your business is going to make principal repayments.

Lenders need to know your business can repay the principal within the required time frame. Any banker will need to see that you can afford the repayments.

7. For equity financing, determine possible business partners and what each partner has to offer the business.

If it is determined that your business needs equity financing, make sure that you only bring on partners who are suitable both financially and personally.

8. Understand what information you will need to present to potential lenders.

Any lender you end up doing business with will require specific information to make their decision. This information is MORE than your year-end financial statement and is NOT just a photocopy of your 5-year old business plan.

Depending on the amount and type of financing you are looking for, a specific financing proposal may need to be prepared and presented to the lender.

9. Prepare the required detailed financing proposal.

The financing proposal is a customized document that will contain information such as the amount of requested financing, projected cash flow statements, a listing of the security offered, a description of the company’s marketing plan, a description of the management of the company, copies of historical financial statements, and more.

10. Source the funding request to lending sources one at a time.

By sourcing the financing one source at a time, you will have the opportunity to fine tune your presentation and make up for any deficiencies in the proposal before submitting it to the next lender.  

Also, make sure you source the financing to the best possible source, not just to any possible source. Determining the best possible option may require some research and patience buy will ultimately shorten your search.

11. Deal with all questions from the lender.

Nine times out of ten, the lender will have questions for you. Your ability to respond intelligently to these questions will tell the lender a lot about you.  

If you are not able to answer all the questions, consider engaging some assistance. This demonstrates to the lender that you have aligned yourself with people who compliment your specific skill sets—an attribute of good management, which is attractive to lenders.

12. Review the term sheets or offer sheets from lenders.

Once the lender has approved your business for financing, the negotiation process begins.

The bank will present the offer on either term sheets or offer sheets.  Make sure you read these documents very carefully, and understand everything in the documents before you sign anything.

13. Assess all terms including repayment terms, interest rates, and any required security.

It is important that you assess all terms of the financing, including repayment terms, interest rates, security, positive debt covenants, negative debt covenants, upfront costs, etc.  Ask either the lender or your advisor—or both—about anything you don’t understand.

14. Negotiate prudently.

Almost everything presented by the lender in the term sheet should be negotiable. But as a professional who has been involved in many such negotiations, I advise that you pick your battles carefully.

Evaluate each term and determine which ones you absolutely must renegotiate and which ones you can live with, even if they aren’t perfect.

15. Sign the required lending and legal documentation.

Once you have been approved for financing and have agreed on all terms, the final lending documents will be prepared by the lender and presented to you for signing.

The funds will then be made available to your business so you can move forward and make desired changes without being limited by cash flow problems.