Provide as much information as possible when dealing with a potential lender, writes Jamie Grant of Barclays
BREWDOG recently launched a crowd funding initiative to raise £4 million to support its expansion, the second time the founders have turned to the alternative method to raise capital.
For the majority of hospitality and leisure companies, however, bank funding remains the reliable option when opportunities to expand or improve a business arise.
That said, securing funding is not without its challenges and it is now more important than ever for companies to provide good quality information to enable lenders to assess funding requests appropriately.
So, what can Scottish hospitality operators do to ensure they are in the best possible position to secure financing?
It is more important than ever to provide good quality information.
Unfortunately, there is no ‘one size fits all’ guide as lenders evaluate a business on its individual merits, but there are some essential steps that will help ensure success.
An early approach is vital to give banks the time needed to make an informed decision, whether requesting funding for business growth or to ease financial concerns.
Every business will have its own needs but, irrespective of size, it should ensure a solid business plan and a credible management team are in place before approaching a lender.
Discussions should be open and used as an opportunity to help the bank understand the business’s historic and current performance as well as using comprehensive forecasting to map out future plans.
Profit and loss and balance sheets are, of course, important but a lender’s key focus will be on the business’s cashflow and risk profile.
Companies have to be able to evidence careful cashflow management under various scenarios and strategies for responding to risk.
Failure to do so is the single biggest barrier to successfully securing funding.
A lender’s key focus will be on the business’s cashflow and risk profile.
It is also important to demonstrate your management team’s firm grip on the business.
Provide your bank with comprehensive management information, including financial metrics and operational measures used for day-to-day decision-making.
Profiling the commitment, motivation and enthusiasm of the senior management team will also do a lot to reinforce the company’s qualities and strengths.
Using the following checklist as your starting point will be a positive first step to securing funding:
• historic financials
• current year budgets
• latest management accounts with summary report commenting on performance against budget and explanations of major variances
• information on key clients/contracts, if appropriate
• group structure chart; legal/operational including key management
• board and key management profiles.
If you can provide comprehensive responses to the above points and have a viable business plan in place then you are ready to approach your lender.
In the case of securing bank support, less isn’t more.
Detail is crucial, not only to properly assess an application, but also to tailor the most suitable funding package because every business is a different brew.
• Jamie Grant is head of corporate banking at Barclays Corporate Banking in Scotland.
Image – Barclays’ Jamie Grant said operators should gather as much information as possible when applying for bank funding.