Availability of financial backing seems to be growing. How can food and drink operators and retailers best secure funding from a lender?
By Andy Hall
THE figures announced by the Scottish Government for the second quarter of the year in August’s Scottish Retail Sales index were welcomed across the sector. The rise of 0.8 per cent illustrates that steady progress is being made, and that the hard work of retailers is paying off.
Retail, Scotland’s largest private sector employer, is better placed than in previous years to be able to invest and grow, creating jobs in the process…
Of course there are no hard and fast rules, and one size does not fit all. Securing funding will always present challenges, and with good reason – lending needs to be right for both the business and the bank.
However, for those looking to grow, there are some steps which can be taken to help secure funding. Funding is available and those who seek it will stand a much better chance if they adopt these points and plan ahead.
You know the importance of good relationships with your suppliers, customers and staff. This should be no different with a lender. Being upfront in the beginning will prevent the likelihood of deals being unsuccessful or being delayed.
Businesses need to borrow for lots of reasons – from needing extra cash to manage a quiet period to financing the next stage of growth. Banks offer a range of ways to help you finance your business. They can also provide invaluable advice on the most suitable way forward for your current business ambitions and plans. Whether you want a fixed-term business loan, overdraft or cash flow finance, it’s important to remember that lenders will always evaluate businesses on individual merits.
Lenders appreciate that circumstances and requirements are different, but they will always look for a solid business plan to be in place – it’s a must.
This business plan needs to address immediate priorities and budgets, but it should also address what the next stage of business growth would look like. While the available financial information will give a lender an idea of your business’s working capital and liquidity, the longer term planning will help lenders gain an idea of your vision. You need to be able to demonstrate how your business is going to make money and set realistic goals to meet those projections. At Barclays we have a strong appetite to lend to ambitious businesses with clear strategic aims.
Whether you need additional business finance to smooth out cash flow over the next few months or a substantial business loan or investment to fund an expansion into a new market, the business plan you put together should present a credible strategy. It should contain:
• details of your product
• description and analysis of the market or markets that you plan to sell into
• a sales plan
Lenders will look to review the business’s management team, its background, its debt service capability and the purpose of the loan. It’s crucial that this information is made available to a lender.
If your sales have been increasing month on month and year on year, there’s clearly a growing demand for your product or service. However, although you may be enjoying the rise in revenue at the moment, sales could flatten out if your market becomes saturated. This could happen if you have a limited number of customers or if a new rival starts up.
So, as you plot your company’s future, it’s important to look carefully at your current market in terms of your available customer base and your competitors. Once you’ve done that, you can begin to build your plan for sustainable growth. If your market is limited, think about how you can overcome this and include your thoughts in the plan.
Lenders and investors are an important source of business finance to fund your plans to take your business forward. However, to access this cash, you will need to spend time and energy creating a workable and viable plan, showing that you clearly understand how much you need and what it will be used for.