Finance Raising – the cold hard truths
This blog was written by our Corporate Finance Associate Partner, Lee Humble.
When raising finance, a lot of businesses fail to obtain their intended support due to a combination of factors.
Whilst often hard to accept, it is essential that the applicant acknowledges the “rugged edges” of their proposal and makes appropriate, fair and transparent disclosure to the funders approached. Some of the areas I frequently see as being major obstacles to a successful raise include:
- A request of a defined quantum with no clear rationale to support, ie why do you need £x?
- Failure to factor in existing debt and the repayments required of those instruments across the same term of that being requested for a new facility.
- A lack of awareness of the security ranking and exposure being borne by each lender and the implications of bringing additional debt through existing or new funders.
- A lack of consideration to historic, recent and future shareholder remuneration and the implications thereof.
- OUT OF DATE, INACCURATE AND SHORT TERM FINANCIAL INFORMATION WHICH DOES NOT ADEQUATELY INDICATE FUTURE PERFORMANCE.
As an accountant and advisor to businesses, I see the above factors repeatedly, with point number five being perhaps the most frequent obstacle. During a process whereby you are inviting a financial stakeholder into your business or to extend their exposure to your business, you need to feed them with financial information. A failure to do so will severely limit your options and perhaps erode your credibility in the eyes of the funder. Such an approach is also highly likely to lead to increased security requirements in which personal guarantees will becoming increasingly apparent.
Setting your stall out correctly, in a robust and logical way which acknowledges the risks and outlines your risk mitigation plan is key, and hence working with suitably qualified professionals (free from bias) can make a huge difference.
The MHA Tait Walker team have worked with a high number of SMEs and assisted them with raising finance, with our team happy to approach funders direct or via our brokerage contacts with a view to securing your intended finance.
If we can help, please do reach out by emailing me at firstname.lastname@example.org.