You don’t have to be a top-notch CFO or an accountant to come up with a strategy to finance your business. Just know that it will take more than you showing up at your lender’s doorstep with a bunch of financials in hand.
By looking back at your greater business plan, understanding what a lender typically looks for in a client, and knowing how to present your key financials when the time comes, you can successfully increase your chances at obtaining the financing you need to grow your business.
Follow these three steps and you’ll be well on your way towards a strong business financing strategy.
ONE: Be very clear about your objectives.
No, the objective isn’t just to obtain financing. What are the overarching goals of your business? How does obtaining financing help you achieve those goals?
Make sure that you have a good solid idea of the “big picture” strategy of your business. A great way to do this is to look back at your business plan and identify the main objectives of your operation.
If you can create a case on why you need financing and how it aligns with your greater business strategy, you are instantly ahead of many business owners and entrepreneurs who are often not very clear on the subject.
TWO: Educate yourself on what a lender looks for.
When a lender has to take time to make sense of confusing financials, the chances of obtaining financing for that potential borrower drops significantly.
Remember, questions cause fatigue.
Take a moment out of your busy schedule to understand what underwriters and lenders look for when given a business’s financials.
When the lender has fewer questions while looking over your financials, the better the chances of them truly understanding why they should extend a loan to you.
THREE: Presentation matters.
When the time comes to present your case for financing, take all of the knowledge and tactics from steps one and two and turn it into a presentation that is clear and concise.
Other than clarity, be honest about your business’s performance over the years.
While this may sound counter intuitive, fully disclosing your business’s performance and explaining the data that they see can help build an accurate case for your business.
Stay ahead of the game.
A terrible situation that afflicts many business owners is when they finally realize that their business needs financing, but are unprepared to approach the problem.
Invest time into fully understanding your business’s financial status. This means creating some kind of system for tracking key data points, or seeking outside help from a business finance specialist. When the time comes to seek financing, you’ll be fully prepared to find the right lender to help grow your business.
It’s interesting that people are willing to take the time to prepare for harsh elements by weatherproofing their homes, or paying for car insurance in case of an untimely and unfortunate accident.
Is it all that different to spend time and resources into preparing your business for growth?
Matt Burk is the Founder, President and CEO of Fairway America, LLC. He is also the co-host of FinanceCoach(sm) Radio. Matt is a small business finance expert that helps small business owners navigate the dysfunctional process of business financing by providing ongoing guidance and expertise.