No matter the economic climate, whether bright or gloomy, SME owners should always manage their working capital well; sufficient working capital is the key to business development. But gaining more working capital is not easy, especially if you were thinking of applying for SME financing. Rejections may be a reality of life, but they are very frustrating. Yet if you prepare well and make your investors feel secure in your company’s outlook, you can optimize your chance for SME financing approval. Here are some more tips that can help boost your chance for financing approval.
Build a Strong Business Plan
Investors always look for a company with a strong business plan. A solid business plan is essentially the most crucial factor in dictating whether your business will be a success or a failure. Investors want to know if you have a clear vision for your business, along with a realistic view of what can be achieved, and strategies on how to get there. Make sure you detail your vision, whether on paper or on an electronic medium – as clearly as possible, to persuade investors.
Provide Detailed Information
Why do you need more financing? To hire new employees? To purchase new equipment? Whatever it is, be specific when creating your financing proposal. Tell your investors how much more capital you need to accomplish your goals and how exactly you will use your requested funds. When it comes to the facts, investors appreciate attention to detail and preparation. For instance, if you need more capital to purchase new equipment, provide the exact costs of the equipment. Don’t forget to detail how much you will need to facilitate this purchase and how the new equipment will help you grow your business.
Maximize the 6 Cs
Perhaps you are asking yourself: what do investors look for when considering financing approval. There are six points, often monikered “The 6Cs.” They are:
- Character – investors will review your personal character based on how you have handled your finances in the past and how your business have performed so far.
- Capacity – The amount of financing load your business can support.
- Conditions – Refers to economic conditions, both national and regional.
- Collateral – Investors will look into your company and personal assets as guarantee if you are unable to return your financing to investors. If you don’t have enough collateral, you may need to start researching unsecured financing.
- Credibility – Show your credibility by providing a detailed business plan.
- Contingency plan – Essentially a Plan B; create a backup plan of how you would return the financing if things don’t go the way you planned.
Understand the Kind of Financing You Need
There is a lot of financing products out there today. Do you want to apply for traditional bank financing? Or do you want to try online-based alternatives such as peer-to-peer financing? Most important of all, research the type of financing most suitable for your business. Do you have enough assets for collateral or do you need to look into unsecured financing? Do you need short-term financing or something more long term? List down all your needs and look for an appropriate financing method.
There are some extra things you can attempt to boost your credibility in front of investors. Provide tangible evidence that you always pay your mobile phone, gas, electricity, and other bills on time. Or ask your landlord to state in a letter that you never pay your rent late. Prepare well, be as detailed as possible, and you will optimize your chance for SME financing approval. Good luck!