8 October 2015 11:00
Research-informed tips for SMEs seeking funding
A programme of MSc research at Plymouth University reviewing the multitude of funding options available to SMEs, and how business can best prepare themselves to take advantage of these options, has just been finalised.
Research was recently completed that investigated which sources of funding and methods of preparation are most prevalent to small and medium enterprises within the UK.
For the study, SMEs from varying sectors were asked about their attempts to gain funding, both successful and unsuccessful. Alongside this, a selection of different funders, with representations from crowdfunding to banks, were questioned to gain knowledge of what they normally see, what they want to see, and what to them would result in greater SME success.
The research findings represent some interesting learning for any business looking to embark on an application for funding.
Here are the top 5 recommendations to SMEs who are about to start their journey on the road to securing funding.
1. Consider your options
The route of funding you follow is the first hard decision, explore all the options out there and really take the time to assess each one before deciding which will work best for your business, not just picking which looks best.
Findings from the study suggest that SMEs should use equity-based routes as a first attempt, such as crowdfunding, to secure both capital and experience. As you develop, you can then look at debt-based routes like government schemes.
2. Get you planning right
Your business and financial plans are what will make or break a funding application, you need to put as much time and effort into them as possible.
The plans should go into great detail regarding content, while aiming to keep it clear. Be concise, but comprehensive. This will undoubtedly take time, so you should factor in an open-ended window of to complete the plans. The research recommended that SMEs investigate to see if their chosen funding route has a framework for how the funder thinks plans should look, thereby allowing for tailored information and increasing the chances of success.
3. Manage the risk
The research found that as an SME you should also be creating a full separate Risk Management Plan, aiming to be as detailed as possible covering all potential commercial, security and financial risks.
The plan is very highly looked upon by funders, who said that SMEs that do not present the plan could be sent away to complete one or risk being unsuccessful, as it provides the extra benefit of security when they are deciding to invest or not.
4. Be upfront about other support
Evidence from the research showed that funders know when an SME has received external assistance, and can see a noticeable difference when they don’t. It is not a sign of weakness to ask for help, and it is readily out there for you to use.
Government programs, accountants, or business mentors can all offer vital support and advice to help you be successful in gaining your funding. Not only will the support make you more knowledgeable, but it will also give your Funder an extra level of comfort knowing the business they are about to invest into has had advice from an experienced source.
5. Share your passion and knowledge
Lastly, an application for finance is really all about you, your business, and why you believe in it. The report showed that funders frequently reject applications where they feel the management is inexperienced or lacking passion.
Testimonials from successful SMEs and tips from funders themselves expressed the great importance of showing that passion. Know every aspect of your business and all the related plans so you are able to answer questions about anything funders may ask. You then need to express this with an outstanding pitch. Make it interesting, engaging and memorable, practised to perfection, presenting you and why your business is worth the investment.
These recommendations highlight what you can do to increase your chances of success when going for funding, but at the end of the day it is down to you. If you really believe in your business, and are committed to doing whatever it takes then success will surely find you.
A warning though, a journey like this is not something you will complete overnight. Be prepared to take your time, it could take you a year or two before you even make your first financial application. This is the investment that you must make, one that if done correctly will result in success.
Blog supplied by Nathaniel Foale BSc, MSc researcher at Plymouth University.