"Can I raise some new capital for my business?" That's one of the most frequently asked questions in my line of business and my most frequent answer is: 'if you look to hard at your own books, you may find you don’t need to'," says Pembridge Partner Rose Lewis.
As an advisor to creative firms across all sectors and of all sizes, I am often approached to see whether I can help owners and managers raise capital for their business. They raise finance for a host of reasons and in a range of different ways.
But one thing that almost all of the firms that approach me have in common is that they have not fully looked into how they can use their own cash flow to raise cash from their own business – before going out to take external funding.
It is imperative that you first assess the potential to free up capital in your own business. More often than not there are ways to structure your company to enable it to generate more free cash flow. I recommend that before you sit down and spend hours of your free weekend on writing a business plan and an investment proposition, you review the internal accounting procedures and revenue structures and change them to fund your company’s needs.
Your professional advisors should be able to help you on this point.
If you do require an injection of external capital, there are numerous ways of raising new cash available to creative firms nowadays. There are two simple questions you need to force yourself to answer before you set out to meet the bank or the potential investor. The first one is “what would I want to use the extra capital for?” The second one would be “ from whom am I asking this extra capital?”
These two questions determine the style and the content of the documents you need to prepare. I have seen the most brilliantly researched and beautifully prepared business plans which were completely lost on the bank. I have seen the most concise and to the point financial projections submitted to investors who simply asked for more background on the business and the management team.
My point is: each different lender and investor has very specific requirements. I advise clients to focus on one way of raising capital in first instance and to make documents tailored to that goal and that audience.
It would be very difficult for me to say something general about business plans and investment proposition as they are completely different from firm to firm. But I can say this: too often overdrafts and bank loans are overlooked as a way to finance a company but they often have an upside as there is no loss of equity, interest rates are historically relatively low and the requirements of banks are less onerous than for external investment.
To explore how Pembridge can help you to raise finance or make the most of your existing cashflow, contact Eve Daniels.
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