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The decision to take external financing, whether a bank loan or equity investment, is a big one. However, sometimes an injection of capital can be the most effective way to grow your business. Here are my top tips on setting about the process:

Finding financing – bank loans will come with an arrangement fee and interest payments, while private equity and angel investments will typically result in sacrificing equity in the business. Both of these approaches can be valuable sources of finance depending on what you are trying to achieve and the state of your business. However, there is also a range of local and national government schemes that usually offer preferential terms. If you would like details, please get in touch – aarnot@mynonexec.com.

Who to trust – knowing who to partner with to make the most of your business is crucial. Some partners will be relatively passive so long as you are meeting your obligations while others will be more proactive in helping drive the business. The best ways to make sense of your options are to build relationships, share ideas and recommendations with a number of trusted MD/Owners of other companies, and to seek advice from your own network of contacts. Online relevant business networking groups can be highly informative while a request for recommendations on LinkedIn can bring a number of responses quickly.

Preparing for investment – investors will want to see a comprehensive business case for their investment and evidence to back up your projections for future revenue / profits. If you are new to securing investment the process can be both time consuming and daunting. Much of the work can be outsourced very cost effectively if you know who to use.

Assessing your company’s value – your company is not worth what you think it is. It is worth what other people are willing to pay for it. In the same way that if you were selling your house you would get a number of valuations and query discrepancies between them, you should do the same with your business. How business value is calculated will depend on the nature of the business.

Securing favourable terms – Investors will be concerned by two things – risk and return. You need to minimise their risk to maximise your, and their, return. Make sure that you know your business and your sector inside out. And make it as easy as possible for investors to see how well run the business is and how sustainable the growth and profitability are. That means good financial and board records as well as avoiding the business depending on any individual or small group of individuals.

Feel free to contact me about MyNonExec service and find out how the 30+ company boards I advise are outperforming their markets.

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