By Pamela Phillips

Earlier this year, I was honoured to be asked to take to the stage at Xero’s Xerocon to discuss how small business owners can raise finance.

The focus was on getting small businesses ‘finance ready’ as we know this is a huge challenge right now in the current financial climate. 

This is a vast and often daunting area for business owners to learn about. I know that many small businesses have struggled to access funding when they need it and I want to support those who are in this position. The need for extra finance can be for many different reasons and it’s important to recognise that it isn’t a negative action to take – rather a process to help build your business and help you become more financially resilient. 

As accountants, we know that one of the greatest challenges for small businesses is accessing capital when they need it most. We are here to support and guide you through this process.

Here’s a round-up of some of the useful insights I shared on the day:

Be ready to identify when funding may be needed:

• Make sure you keep your numbers up to date by adopting good habits like weekly bookkeeping and using online accounting software like Xero to build efficient and easy (and regular!) processes. 
• Try to regularly run cashflow forecasts (we can support you with this if needed).
• Run regular management reports and hold meetings with your accountant to discuss future risks and opportunities.
• Ensure you monitor your KPIs regularly to identify when financing may be needed.

Understand the different types of lending options available

• There are many different types of lending options you can consider as a business owner e.g. loans, invoice finance, and asset finance. 
• Understand the pros and cons of each option and what is most beneficial to your business at this moment in time. 
• Work with a broker like Capitalise to guide you through the process.

Give your lender confidence that you run your business with good financial rigour

• By already having up-to-date numbers in Xero, and readily available management reports and cash flow forecasts gives the lender confidence that the business is being run with good financial rigour. For example, if your lender asks for the latest management reports and it takes weeks to bring them up-to-date to get them in a position to share them, this would not inspire confidence.

• Make sure you have a clear narrative around your numbers. Know the drivers behind the swings in your data. Be ready to share the story to go with the numbers.

On the panel we also talked about:

• How the funding environment has changed in the post-covid world. Small businesses are more willing to take on finance (post-bounce back loans and CBILs loans). Debt is becoming normalised.

• However, post-covid finance is now harder (but not impossible) to access.
• There may (and will) be times when a company has taken on too much debt and needs restructuring support. In this case, and actually, far earlier than this point, we can introduce business owners to insolvency practitioners for guidance on the viability of a business in its entirety. 

To find out more about the insights other members of the panel shared, then check out Xero’s blog here. 

If you would like to learn more about how you can raise finance for your business, then simply book a chat with the dP team today.