If you’re a business owner, at some point you may need to apply for funding. This could be because to plug some unexpected cash flow gaps, update old equipment or fuel expansion by taking advantage of a new market opportunity. Whatever the reason, applying for funding can seem daunting and intimidating — but with a little bit of preparation and research, it’s very possible to secure the money you need. In fact, according to recent research by Business Finance Solutions (BFS), more than 70 percent of small businesses in the UK have secured some form of external finance in order to expand their operations or improve their productivity over the past 12 months.
Know how much money you need to apply for – and why
Before you begin to apply for funding, it’s important to know how much money you need and why. The more specific the lending purpose, the more likely the lender is to view your application favourably. While many lenders operate on “algorithm” lending models, a lot of applications are still manually reviewed. Having a clear funding purpose helps the underwriter understand where the funds will go and how they will positively impact the business.
Make sure you provide the right information.
- Ensure you provide all the information requested. If a funder asks for receipts, include them. If they ask for your resume, provide it in the exact format requested.
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Be specific and clear in your answers. It’s fine to state any assumptions or limitations of your project, but don’t exaggerate or embellish anything that has been asked from you—and definitely don’t make stuff up!
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Make sure you have all the documents required to apply for funding. Some funders require proof of commercial viability or research evidence, so make sure you have those documents before applying (or at least know where they are).
Prepare your documents before applying.
You’ll provide a great impression if you have the documents ready when you apply. This includes:
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Business bank statements
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Accounts and other financial statements
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Details of the directors and shareholders
Having quick access to documents provided in a well-displayed manner conveys a message of competence and organisation to the lender, which can increase the lender’s confidence in the business.
Be transparent with “negative” factors
It may be tempting to leave the “negative” aspects of your business out of your funding application, but it’s important to provide as much detail as possible about these issues. If you don’t disclose them, you risk having a lender question whether they are being misled or not given full information—and that could lead them to decline the application.
When addressing negative factors in your business, be realistic in your assessment of the situation and its potential impact on future growth and profitability. For example, if you recently lost a key customer due to financial pressures, explaining to the lender the cause of the problem and the actions being taken to fix the issue and prevent it from happening again shows the lender that the business has learnt from past mistakes.
Don’t underestimate the importance of cash flow forecasts.
Cash flow forecasts aren’t necessary for every application, but they can help lenders see how the funds will be used and the effect they will have on the performance of the business.
A cash flow forecast is a detailed account of your projected income and expenses over the next 12 months. It should include the date you expect to receive each type of revenue—whether that’s grant funding, trading income or income from other sources—and when you expect expenses to accrue and be paid. A good cash flow forecast should include things like whether staff will hired to help facilitate and deliver upon the increased expansion, as well as any potential recruitment and training costs which may be incurred. Including a cash flow forecast in your application makes it easier for lenders to understand how your organisation will use its funds efficiently and responsibly.
Conclusion
We hope these tips help you improve your funding application. Raising funding for your business can be a time consuming process.
We’re specialists at raising funds for businesses, whether they’re seeking invoice finance, asset finance, revenue based finance or something else. Fill out our application form or leave your contact details and one of our team will be in contact to learn more about your business and explore your suitable finance options.