Lots of businesses are seeking out finance at the moment, whether to fund an acquisition or finance investment, but given the challenges the economy faces, it is becoming increasingly difficult to secure the right deal.

If a business hasn’t sought out finance for a while or there has been a significant change to their operations since they last requested funding, then there are a few steps they should consider to improve their chances of success.

Review your business plan

A business plan is often one of the first documents that a potential lender and/or investor will want to see, as it clearly lays out your vision for the company.

Having an up-to-date business plan will show financiers that you have a path to profitability and growth, giving them the confidence to invest or lend you the money you require.

If you haven’t reviewed your business plan in a while, take the time to review it and update it, highlighting potential future risks, as well as opportunities.

Investors or lenders will appreciate transparency as it makes it easier to calculate the benefits and disadvantages of a deal.

Get the figures to back you up

As well as having an effective business plan, businesses will need to be able to demonstrate that they can service the debts of any loans that they make or offer the right level of return to investors.

A key aspect of this is demonstrating financial health and positive cash flow. Although not essential, it is highly recommended that you produce detailed management accounts in the months leading up to seeking finance.

This should demonstrate profitability, cash flow, debts and sales. Doing this over a period of several months will give a lender or investor confidence that the business is stable.

Be realistic

If you are borrowing for a specific reason, such as investment in a particular piece of equipment or to hire a certain type of employee, borrow as much or a little more than you need.

Lenders will want to check the value of the investment you are financing and may be concerned if you borrow too little or far too much.

Both may indicate that you are taking on too much additional risk, which could affect your ability to repay them.

Prepare for due diligence

At some point during the lending or investment process, the other party will want to conduct financial and legal due diligence.

It is unfortunately fairly common for deals to fall through at this late stage because a detail has been missed.

Remember, lenders and investors tend to be risk-averse. If they feel that something uncovered during due diligence should have been revealed to them earlier it can put them off entirely.

Try to be as open as possible early on and you should avoid any complications during this stage that may prevent you from obtaining the finance you need.

Try alternative finance

If you can’t get a loan from a traditional lender or you are struggling to find investors that will finance you, then you may want to consider an alternative form of funding.

There are a growing number of alternative finance options out there to help. If you need money in the short term, for example, you could use invoice finance.

This allows a lender to effectively ‘purchase’ your unpaid invoices for a fee. Then when the invoice is paid by the customer, you get the remaining balance minus the fee.

If you need to borrow a larger sum then you could borrow against your existing assets or property owned by the business. This could help you secure a larger sum over a longer period but may put the assets you own at risk.

Finally, there is crowdfunding and peer-to-peer lending. This approach allows businesses to seek finance with a number of individuals, often online.

Typically, investors will be offered a small percentage of equity in the company in the case of crowdfunding or will see numerous lenders loaning money and earning interest on repayments.

This allows investors and lenders to share the risk, which makes it easier for them to lend the money.

Seek help

Possibly one of the most important steps you can take is to seek corporate finance advice from an experienced expert. They can help you to find the best deal and assist you with preparing the information that lenders and investors need – brokering the best outcomes for you and your business.

The last month has highlighted the challenges that many businesses face when it comes to supplies and costs.

Visions of people filling up plastic bottles with petrol or pulling trolleys of toilet rolls to their car may seem bizarre but they have become reality in the last year and this shortage of key supplies is affecting businesses.

Companies already face a number of problems as they struggle to get back up to speed following the COVID-19 lockdowns.

A shortage of supplies and skilled labour is another challenge that may prevent growth and risk their viability.

Of course, the media crying out for panic buying doesn’t help and neither does messages about a ‘black Christmas’ but these concerns are based on reality.

While we still face potential disruptions from the pandemic, the main issue at this time seems to be the growing shortage of deliveries due to issues with supplies of certain components and a nationwide driver shortage. This was typified in the panic buying seen at many forecourts.

The UK is facing many difficult issues at the moment, supplies and drivers being just two. Businesses must also contend with steadily rising energy prices and growing inflation.

To fix part of this issue, the Government has plans for temporary visas for 5,000 foreign lorry drivers but the British Chamber of Commerce (BCC) has described this measure as ‘a thimble of water to put out a bonfire.’

Last month more than a million vacancies were reported. The good news for many workers was that wages are rising, but the downside is that it creates inflationary pressures which in turn affect prices.

What next?

The current crisis all amounts to rising costs for businesses, which must adapt to new circumstances. Given this new period of uncertainty businesses should:

• Plan for future fuel shortages
• Assess their gas and electricity prices and seek out better tariffs
• Build a strategy for taking on staff as well as retaining key workers
• Seek out new suppliers that can provide the materials and services needed
• Outsource business functions to reduce costs and the reliance on certain skills
• Consider how rising supplier costs will affect their end product prices and underlying profits and investments.

For example, prolonged fuel shortages could be alleviated by turning to electric, particularly if you have a fleet of vehicles.

Why act now?

Crisis planning may seem like something that can be kicked down the road but eventually, that road runs out, by which point it is too late to act.

While many larger firms have contingency plans in place, for many small businesses they can be seen as an unnecessary additional cost.

However, regularly reviewing the costs within your business and creating a crisis strategy are both essential steps in building greater resilience. With an uncertain future ahead of us, now is the time to take action.