This article outlines the basic steps you should take when trying to arrange finance from one of the organizations discussed above. In practice the details will vary according to the nature of your business, the sum required and the organization you approach. The procedures set out below are those which commonly apply when borrowing sums of about £5,000 to £50,000. If you are seeking a smaller amount the procedures may be shorter; if you wish to borrow more you may have to prepare a more detailed case.
Your initial visit to a financial organization, before you have a particular property in mind, will be brief and purely exploratory. The aim is simply to make contact and to alert them to the fact that, unless they reject your ideas at the outset, you intend to return when a property has been found. Once you have identified the property you want a second visit should be arranged as soon as possible because speed may be essential if you are bidding against other interested businesses. You should prepare a brief document (three or four pages) giving basic information about your business, the property (use the estate agent’s handout), the amount you wish to borrow and the preferred method of repayment. It also helps to have a written letter of recommendation from your accountant, a professional business adviser or, if appropriate, from your bank manager. At this meeting you will be ‘sounded out’ in a fairly general way. It is unlikely that you will be asked any highly specific or penetrating questions about your firm’s financial or cash flow position, but be ready with some basic facts and figures just in case. If they are satisfied with your initial ideas and interested in your proposition they will invite you back for another interview and a more thorough assessment.
For this final interview you will need a much more detailed document which, because of its essentially financial nature, is best prepared with the help of an accountant. It should include the following information:
- Details of your business (your product, markets etc) together with any sales or publicity material.
- Details of the property in which you are interested (use the estate agent’s brief).
- The amount of finance you require and the preferred methods of borrowing and repayment.
- An historical analysis of your firm’s finances (generally three years’ minimum).
- The most recent trading figures and audited accounts.
- A forecast of cash flow and your trading position.
- Details (if appropriate) of your management team and their expertise.
- Your company’s major shareholders (if any).
- Your current banking arrangements.
- Any assets which are available as security.
Preparing a document of this nature will take time. If you are confident that you want to move and that you have a strong case for financial support, you can prepare the document even before you have found a suitable property. Details of the actual premises can then be added later. Preparing the document so far in advance can be a gamble especially if it becomes clear later that they are not interested in your proposal, but most financial organizations will be impressed by these early preparations made without them having to specify exactly what is required. It will certainly enhance their estimation of your management capabilities.
During the final meeting you will be asked questions about the accuracy and realism of your facts and forecasts. If your knowledge of accounts is not strong enough to withstand a barrage of questions, take your accountant with you. This should ensure a professional presentation, but it does not mean that you can sit back and leave everything to your accountant. You too will need to know the document ‘inside-out’. Be confident and positive. Their personal impressions of you will be important; it is often a gut feeling about the applicant which sways the final decision. Good health, integrity, logic, imagination and experience are key attributes that most investment managers will be looking for in a client.
A word of caution is appropriate here. Most lending agencies can differentiate between an accountant’s plan and a small firm’s plan. They will be looking for what you want to do, aided by your financial advisers, not what your advisers would like you to do. After all, it is you as proprietor or owner-manager who will be implementing the decision.
The appointment of a surveyor to examine a property and ensure its value and future well-being is usually undertaken near the end of the financial negotiations. In this way surveyors are not employed until the lending organization is fairly confident they will lend money for the purchase of the premises.
Either during or soon after the final meeting you will be told whether or not they are willing to lend you the money. If you do not succeed with one organization, take heart — there are plenty more you can approach. Try to learn the lessons of your failure so that you can prepare a stronger case next time. However, if you get a series of rejections you may need to rethink your proposals or even to reconsider the whole idea of relocation.
