10 Key Steps to Financing Rapid Growth

financing-rapid-growth

Growing a company often requires significant financing. Purchasing new equipment adding product lines, expanding the premises or raising additional working capital to fund growth are just some of the reasons why a company might want to think about putting together a proposal to obtain financing. Here are 10 key steps to financing rapid growth:


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Choosing the right source of financing is very important. Sources will be determined by the purpose of the financing, how long the funds are needed, and how much those funds will cost.

  • Secured lending - the cheapest type of debt to obtain due to the relatively low risk to the lender, it is also the most widely available type of debt - financed either with normal repayment from cash flow or, if that fails, with liquidation of the assets held as security.
  • Cash flow or mezzanine finance will provide capital in situations where there is insufficient tangible security to cover the loan but strong historical cash flows. Higher risk, this type of financing generally has higher fees and rates of interest.

A financing proposal should include:

  • a table of contents
  • an executive summary
  • the business plan (including a history of the company, an overview of the industry, a description of operations, an outline of the market and market share, a breakdown of management and staff including critical CVs, location and facilities, and a list of professional advisors)
  • a detailed breakdown of the source and use of the funds required
  • a financial analysis and projection

Always keep in mind when starting the proposal process that the business is trying to obtain the most amount of money, for the longest period of time, at the lowest cost, and with the best terms and conditions.

Recommended reading: A Simple Guide to Raising Capital

10 key steps to preparing your proposal to finance your rapid growth

1. Start planning early

Prepare a proposal and look for the funding in anticipation of needing it. Looking for it when it's needed puts the business in a weak bargaining position. Putting off the task and rushing at the last minute to tie up loose ends will not result in a strong proposal and will not allow the company to negotiate from a position of strength and confidence.

2. Clearly define needs

Be clear about needs for financing or how the business can benefit from the added capital, so that the program best suited can be developed. Working out these details ensures that time and money are not spent unnecessarily on financing that is not possible, or on clarifying needs when it's too late.

3. Have an accurate business plan

Make sure the business plan emphasises the company's competitive advantages as well significant risks and mitigations. Be honest. Capital sources need to understand the strengths and potentials of the business. And instead of trying to hide any weaknesses or risks, acknowledge and explain how to overcome them.

4. Ensure projections are realistic

Do the market research and make detailed projections on the company's future potential earnings. Showing a prospective source of finance the homework adds credibility to the application and shows a serious candidate. Remember: providing conservative projections is better than promising the world.

5. Cover all the key issues

Ensure the business plan covers all the key issues with all the information needed by the lender to make a decision. Proposals should be concise and fact-based, with detailed financial statements and forecasts provided in appendices.

6. Get to the right people

Present the proposal to the right people at the right financial institutions. Direct proposals to the decision makers, generally someone at the most senior level possible. This will ensure it gets the attention it deserves and isn't delayed as it makes its way through a maze of in-trays.

7. Find the right lender

Pre-screen the institutions over the phone to ensure they are able to provide the kind of financing required.

8. Remember to negotiate more than the interest rate.

Negotiating repayment and prepayment, security, terms and conditions helps give the financing more flexibility. Report requirements, covenants and other conditions are just as important to the financing agreement as the almighty interest rate. Also take into account all of the potential fees involved.

9. Follow through

Once the proposal for financing has been approved, follow through on the disbursement process. This will include satisfying any legal requirements, providing insurance documentation to the lender, and satisfying any conditions that are set out in the offer of finance that, if not attended to, can prevent the financing from proceeding.

10. Keep in contact with the lender

Maintain regular communication and provide any required reports to the lender on time. Keep the lender abreast of any changes or significant occurrences in the company - good or bad. Remember, lenders do not like surprises.

Over to you now. What's your experience of financing your company growth? Tell us in the comments below. 

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