Q. I need £2-3m to invest into my business (on equipment, stock and extending my premises) and I am considering various finance options, although I would prefer to hold on to as much equity as possible. I have a fully costed plan and have done projections that show we will be profitable after about 18 months. However, I am also nervous that my plans could be thrown off course, particularly in this rather uncertain climate. Could you advise me on dealing with providers, the types of questions they will ask and how I can request flexibility in repayments without coming across as a bad debt?
Kevin Weaver writes:
You’ve got a head start as you have already spent the time preparing your business plan and projections, which any funding provider would see as a prerequisite. Ensure these documents are clear and up to date and presented in a format that shows where your business has come from, where it is, and where it’s going, backed up with a robust SWOT analysis.

Providers will have questions around subjects such as the number of years trading, history of company and its management team, expansion plans, evidence of security and market forecasting.

Venture capital is another route, but investors will usually require a substantial stake in your business to make their risk worthwhile.

It may pay to investigate longer-term funding options that will put less immediate strain on your cashflow and give you the flexibility to cope with a changing marketplace. Don’t worry about discussing flexible repayments upfront. This could be seen by funding providers as diligence on your part, not a bad debt alarm bell.

For large equipment purchases, an asset finance solution like leasing or hire purchase may be the best option. It spreads the cost over an agreed period, without the need for upfront capital outlay (other than a deposit), giving you more flexibility and less risk to bear.

For day-to-day working capital, an asset-based lending facility could be the answer. This unlocks value tied up in the assets of your business, including stock, unpaid invoices, and plant and machinery. It can also be backed with bad-debt protection, which will provide financial cover for your business should a customer be unable to pay.

If a blend of different packages is the best solution, try to strike a deal from one funding provider to supply every component and save money overall. But remember the cheapest deal may not always be the best, certainly when it comes to flexibility.