Financing the Company’s Activities
Financing the Company’s Activities
Typical investment stages in the company’s lifecycle will include start up, early stages and expansion, management buy-in, turnaround and there are many ways a company can improve its finances including introducing financing. When seeking finance there are of course many options but with recent economic conditions which have tightened availability of bank lending a more strategic approach is often required to secure terms.
Reasons to introduce finance
Along with the typical investment stages other reasons to introduce finance might include:-
- Growth capital
- Investment in capital equipment or land & buildings whilst taking advantage of capital allowances and reliefs
- Entering new markets and/or developing new products and services
- Release value in the business or de-risk by extracting cash from the business
- Improve the working capital position and thereby negotiate better terms with suppliers by paying earlier and/or offer extended terms to clients to win more business
- Succession planning
Before introducing short-term finance business owners will therefore need to consider the longer-term objectives to ensure it offers flexibility for the next stage in the business life-cycle.
Types of finance
Generally the type of finance will sit along-side the strategic objectives but often it may be that a combination of different types of finance will be appropriate to provide the right balance and flexibility.
What funders look for in a funding proposal
The following 3 key areas will need to be considered.
- A well-structured and balanced proposal that covers the key risks and mitigants, supported by financial analysis and a financial model. The financial model would need to be an integrated profit and loss, balance sheet and cash flow model and ideally be a “rolling model” supported by pipeline revenues and built in sensitivities to demonstrate that management seek to critically appraise all costs and generate and retain as much cash as possible.
- Cash Flow Available for Debt Service is key measure that lenders will focus on and its important the financial models can demonstrate a cushion taking into account the key sensitivities.
- Lenders will also want assurance that the business is carefully managed and controlled and will require an understanding of the business model, management team, market and competitive environment together with key factors that influence financial performance.
How can we assist
As well as having the experience and knowledge to prepare the funding proposal and supporting financial models and knowing which lenders to approach we can assist in benchmarking the most competitive package, as typically more than one funder will offer terms and as highlighted above management will need to consider a range of funding options often from different types of lenders, ranging from the high street banks, challenger banks, specialist lenders, debt funds and other lenders.
We believe we are more than just your average accountancy firm. Our goal at Barnes Roffe is to engage our clients through a proactive relationship, which provides you with the resources and tools you need to enable you to take charge of your finances with confidence.
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PLEASE NOTE: By the very nature of this type of information the details of tax law might have changed since they were published, so contact your Barnes Roffe partner before acting on any matter contained in these documents.