Access to Finance - Learn how to source and raise business funds for growth

Access To Finance For Start Up and SMEs

Learn Strategies for attracting finance for business plus audio

Copyright© Sheila Elliott 2014 | Business Services Support Limited

http://www.businessservicessupport.com

Helping You Succeed In Business

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Contents

Chapter One : Introduction .................................................................................................................3

Chapter Two : The purpose of this book and what you will learn .........................................................5

Chapter Three : Learning about the mindset and needs of financial investors .....................................8

Chapter Four : Different Sources Of Finance For Business .................................................................. 17

Chapter Five : Understanding Your Relationship With Money ........................................................... 22

Chapter Six : How To Wow Financial Investors .................................................................................. 34

Chapter Seven : Conclusion .............................................................................................................. 40

About the Author ............................................................................................................................. 42

http://www.businessservicessupport.com/




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Chapter One : Introduction

he ability to attract finance to start a business or to develop and grow an existing

business is one of the many challenges that an entrepreneur often faces. This is

because many entrepreneurs, whilst extremely knowledgeable in their core

specialism, often have limited knowledge of financial markets. But hang on! Should this

trend be allowed to continue? Think about it.

When interviewed, it was not surprising to find that many aspiring and existing

entrepreneurs including those with no interest in starting a business stated that sourcing

finance to start a business is a difficult act to follow. Fortunately, a small group of

entrepreneurs do not share this common and often misconceived belief, which in itself

shows there is hope for all of us.

Let us explore two experiences; the first being a business owner who walks into the bank

and comes out extremely distraught and in a worse case scenario, comes out in tears.

Whether you believe it or not, this happens all the time and I have met countless business

owners who find themselves in this category. Then there is the other business owner,

who walks into the same bank and comes out smiling. One comes out with the funding

he is seeking whilst the other comes out with absolutely nothing.

Does this sound familiar to you? Which camp do you often find yourself in?

So why are the experiences between these two business owners so different? Some of

you will say the reason is because one is a woman and the other is a man, or one is from

an African origin whilst the other is from a European origin or one is you fill in the blanks

whilst the other is blank blank blank.

Whatever the prejudices that may exist in the financial market I have seen people of

different gender, race, or circumstance having these negative experiences and complain

about preferential treatments, whether at a conscious or unconscious level. There are

steps entrepreneurs can take to boost their chances of success.

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The title of this book is “Access To Finance For Start-up and SMEs”. The book covers a

wide range of salient points that should provide you with tools to better prepare your

business to raise finance. Whether you are a start up or an established business the tools

shared in this series should help you tremendously.

Very often, entrepreneurs undermine their potential in the financial market. They enter

the market unaware of what they are selling or buying.

The fact is this; investors are money sellers. They sell their monies for financial gain and

as a result they are constantly looking for entrepreneurs or businesses with great ideas

that can be commercialised for profit. Without business opportunities in the market,

financial investors will not thrive and will go broke. But what does great opportunities

mean for an investor. After all, I am yet to meet an entrepreneur who is to describe their

business idea as crap. All will tell you that their ideas are great. The trouble is, financial

investors know the value of money and cannot afford to plant it where it is least likely to

grow. They need to find fields that are well fertilised for money seed to be sown and to

flourish. One foolish decision and their seed is destroyed so to speak. In simple terms, the

greatest risk facing a financial investor is what is called capital risk, which is the risk that

their capital will not be repaid. This explains why financial investors are very selective

about who they do business with as their primary objective is to multiply their money.

Armed with this knowledge, your best shot is to go into the market as a seller of business

opportunity that will enrich the investor, as well as your business. If you operate with this

knowledge in mind at all times, spending time developing your business ideas and making

them marketable and profitable will be your number one priority before approaching

financial investors. All too often this is where the problem lies. Most entrepreneurs want

to go off and get other people’s money to invest in a project they themselves cannot

afford to invest in. Many do not want to spend time to develop their business ideas and

they are then surprised when no one invests in their business. Enough of background

information let move on to the next chapter.





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Chapter Two : The purpose of this book and what you

will learn

efore we progress through this journey, it will help greatly if you know exactly

what you are about to learn. You may find that some of the topics covered are

already familiar to you, and if this is the case, you can skip the topic and move on

to others you wish to learn. I encourage you to go through each topic carefully because

in this series we are looking at the subject of finance from the perspective of financial

investors and yourself. Against this backdrop, let me quickly summarise what you are

about to learn.

In this book you will learn about:

◉ The primary needs and concerns of investors when making decisions to invest their

money for a share of future profit in a business, irrespective of the type of

investors.

◉ The importance of understanding your relationship with money and the impact

that plays in your credit rating and your capacity to influence others to invest in

your business.

◉ The importance of putting together a quality team for the purpose of delivering

the services or products of your business.

◉ The language of the financial market, which many shy away from, only to find there

is no escaping when they start thinking about starting a business or growing an

established business.

◉ How to wow the investors with your business proposition and common mistakes

you need to avoid.

◉ The common risks associated with most businesses and effective strategies for

managing, whilst instilling confidence in the mind of financial investors.

◉ How to present with confidence and avoid pitfalls that can create doubts and blast

out all chances of closing a deal.

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All of this means that by the end of this series you will be extremely knowledgeable and

confident about what is required to raise finance for new business ideas or the planned

expansion of an established business.

Make no mistake, if you are to win the confidence of investors, you and your team must

understand these topics and moreover should be able to apply the knowledge correctly.

The ability to influence others to say “Yes” to your proposal requires power on your part.

And power is enhanced when you can correctly direct and apply accurate information

towards a particular course of action.

When an unknown man by the name of Andrew Carnegie, who went on to become a

millionaire through his businesses, influenced a team of savvy financial investors to invest

millions of dollars into the American Steel Corporation, it was no accident or luck. By all

stretch of imagination, many would have never dreamt that he could pull such a deal off

– but he did.

He had invisible ammunition (so to speak); this was passion, industry knowledge and an

understanding of what will motivate investors to happily part with their cash for his

dream. No one who has studied his life will deny that his understanding of what motivates

investors helped him to package his message appropriately and concisely,

The objective of this series is to help you develop the same confidence as he did. We want

you and your team to recognise that if one man or woman can do it so can you and what

is even greater “So Will You”. We want you to take the limit of your mind and recognise

that the only thing that is between you and success is the way you think. The moment

you say,” it all well and good to hear the success stories of others, my situation is

different and no one will invest in my business- you are doomed”. Why? Simply put, you

get what you expect consistently; it is the law of the universe.





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You can even the bargaining power between you and your financial investors. You can

only do this if you have a good understanding of your power in that intercourse. For this

to happen, you need to know how much you and your business ideas are worth to a

financial investor.

Let me ask you one more question. How do you think banks make their monies? Think

about it. They have to invest your hard earned cash that you deposit into their account

for safety into business opportunities in the broad market. It is so important you

understand this. Make a decision today that you will utilise the knowledge from this series

to your advantage and take the appropriate steps to develop the capacity for your

business to be finance or investment ready. Let us start delving into the subject matter

now. Yes, we are only starting the now, as everything that has been said so far is

background information.





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Chapter Three : Learning about the mindset and needs

of financial investors

want you to imagine for a minute that you are someone with money to invest and you

are looking for opportunities to make your money grow. In short, you are a business

investor. It is important you learn the mindset of an investor because as a business

owner you are going to automatically become one. To think and act as a consumer whilst

attempting to become a business owner is not going to serve your long term interest. You

are to understand the mindset of consumers and also the mindset of investors if your

decision making process is to be sound.

If you cannot see yourself in the capacity of an investor at this point, how about closing

your eyes for a few moments and think of a savvy investor you know. Take up to 10

minutes to do this exercise. You may even want to use the Internet to find some names

that you can relate to. If you do not know any savvy investor let me give you some names

that you may want to play around with as you are just about to go into a process we call

the visualisation process:

How about seeing yourself as Richard Branson

How about seeing yourself as Donald Trump

How about seeing yourself as Deborah Meaden

How about seeing yourself as Peter Jones

How about seeing yourself as a sound investor you personally know in your own

community.

I hope by now, you have got an image in your mind.

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Now make sure you are in a quiet environment that you are not likely to be disrupted in

the next fifteen minutes.

Close your eyes and quietly see yourself as a savvy investor with lots of money in your

briefcase to invest. An entrepreneur has just visited you in your office for the purpose of

requesting you to invest in their latest invention. You have listened to his business

proposal and you are asked to part with £150,000 to help the business manufacture and

market the products.

I want you to take a good look at this entrepreneur in your mind’s eye.

What are the questions that you will ask him?

What will be your concerns that you will want to explore with him? What will make you

want to give him the money?

What will make you say no to him even though he has taken his time to come and present

his proposal. Think quietly and slowly.

Be simple in your approach.

Now open your eyes and write down the questions and answers that come to your mind

during this exercise. Take five minutes to do this exercise. How do you feel?

Whether you like it or not, you have just gone through a process of empathy. You have

just switched roles with a financial investor. In fact, the process you have just gone

through should help you see your own proposal as financial investors see it. It is always

helpful for an entrepreneur who is seeking financial investment from a third party to be

able to take a step back and objectively see their business as others will see it. If you can

do so consistently, you will be in good stead to make any adjustment required for

improvement.

Let us now move on to explore investors’ typical needs.





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Typically, when you approach an investor for capital to invest in your business, you are

either asking them to give you a loan or take equity in the business or a cross between

the two. We will cover the different types of investment you can entertain as a strategy

for business growth later. For now let us confine ourselves to the reasons investors sell

their hard cash to entrepreneurs.

The fundamental principle you must bear in mind at all times is this, financial investors

are in the business of making money for their shareholders or themselves and so when

they lend money or invest money to businesses, they are not doing so because they love

the directors or the owners the businesses. In short, their decision to lend you money or

buy an equity stake in your business is not down to you being the most handsome or

beautiful person in the world, but rather because you offer them an opportunity to

maximise their own business objectives to make money.

When it comes down to the final decision, a financial investor has one key question in

their mind- “What is in it for me”. That is something you have to bear in mind. I attended

a finance seminar once where a senior banker was sharing his wisdom to the board of

directors of different organisations holding significant private loan portfolios with banks.

I remembered his opening statement to us. He put it simply to us that our primary motive

for being in business is to increase the wealth of our shareholders. What this means is

that we will not lend money to businesses that we have doubt will provide us with the

capacity to maximise shareholders’ wealth.

Whilst this comment was extremely blunt; I did admire his courage to be honest and

transparent to us. After all, every business has objectives, whether social or commercial.

If those with social objectives are proud to share their objectives openly, even in the face

of criticisms, why should a bank or a private investor shy away from doing the same?

For that reason, the financial projection of a business is one of the critical tools banks and

private investors are interested to review. They want to know that the business can make

them money. For that reason they want to see the projection for sales income, cost of

goods sold, gross profit margin, net profit margin, ebitda cover, cash flow margin, return

on investment and more.





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These are all financial jargons that you may not be accustomed to and as a business owner

or manager seeking to raise finance, you certainly need to quickly acquaint yourself with

these concepts which we will cover later. You cannot afford to say my accountant will

deal with it and I will just press on with something else. Of course, your accountant can

provide some support but you should not abdicate your responsibility for learning even

the language of the financial markets if you are to influence them effectively. We will turn

our attention to this area again in subsequent sections of this training.

Let us look at other needs of financial investors. A savvy investor is always concerned with

understanding the risks of the business opportunity, as well as the rewards that can be

gained to compensate for the risks. Typically, a savvy financial investor wants to know

what are the inherent risks associated with the business and what are the rewards for

investors. Think about it. The risks of depositing your money with a bank are not the same

as the risk of investing your money in a new start of business that is controlled by

someone other than yourself. For that reason, if an investor perceives that the risks of an

opportunity are too high, then sure enough, he will want to reap a return that is

significantly higher than interest rate offered by a bank in order to compensate for the

higher risks.

Like you, Investors are acutely aware of the continuous changes in market dynamics and

the opportunities and threats that come with such changes. Therefore, the consequences

for tying their money with one opportunity for too long may present challenges that are

not acceptable in most cases unless of course the capital is safely backed by a quality

security. Remember that any time an investor’s money is tied up in an opportunity it

means new and better opportunities cannot be exploited.

For this reason, you will find that financial investors are typically concerned about the

payback period of an investment decision. This is covered in our 'Financial Project

Evaluation Workbook' for those of you who want to learn more about financial evaluation

tools used for investment appraisal. The investor wants to know how long it will take for

the opportunity to pay back the capital and then start generating returns in excess of the

capital for the business. It goes something like this, if I invest £50,000 today, how long

will it take for me to have my £50,000 back in the form of dividend or interest? Once the

£50,000 has been paid back, what are the potential dividends or interest that will be paid

to me thereafter?





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With this in mind, you will not be surprised to find that a shorter payback period is more

attractive to an investor than a longer one. In practice, if the payback period for an

investment is deemed too long, then the risk to the investor will be too high and it is more

than likely the investor will opt for a better opportunity. What all of this means is that you

should be aiming to communicate that the payback period for an investment in your

business is relatively short particularly when dealing with an equity investor.

Savvy investors never invest blindly without thinking about the exit strategy. Some

investments are easier to exit than others. When you listen to investors quizzing

entrepreneurs who present proposals for investment, you will very often hear them

asking about the exit strategy. This is commonly referred to the fall back position. One of

the fall back positions that financial investor will take is collateral with a monetary value

in excess of the money invested. You will hear comments like loan-to-value.

If there is one common trait amongst savvy investors it will be this. They always want to

know about the business opportunity in detail. They will not trust your judgement just

because you ask them to do so. They believe that they have the responsibility to think for

themselves and do their own due diligence. For that reason they will not part with a single

penny until they have a clear understanding of how a business opportunity works. Let me

share with you an experience that will help bring this home to you. As a consultant, I help

businesses put together business plans to raise capital for a new business or for business

expansion. There was a gentleman who had approached his bank for a loan to start up a

business only to be turned down flat. When I asked the reasons for the bank’s decision, it

became apparent that his business was not quite understood by the bank and his business

plan that was presented at the time for the loan was incomprehensible with financial data

that were not well presented in the conventional manner. No serious investor will part

with money for an unclear business opportunity. Novices will do so, and of course learn

the hard way. However, savvy ones shy away from such practices.

Some of you may have heard about a wealthy man called Warren Buffet. I want to take

this opportunity to share his wisdom on this subject so that you can get into the mindset

of a savvy investor. This will not only help you in approaching financiers in the correct

manner in future, it will also help you to make wise financial investment decisions.





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Warren Buffet believes, as did Benjamin Graham, that investors should look upon share

investment (i.e. buying equity stakes in a business) as buying a part of a business.

Investors should take the same approach to buying shares as they would if they were

buying a business. The only difference is that instead of buying the whole of the business,

or a partnership in the business, they are only buying a tiny share.

A prudent investor never buys a business that they do not understand. Similarly, a

prudent share investor should never buy shares in a company, whose business they do

not understand.

In 1977, Warren Buffet told shareholders in Berkshire Hathaway that their company

would only invest in a business that the directors could understand. He has repeated this

message many times since. In 1992, he expanded on this theme:

‘We try to stick with businesses we believe we understand. That means they must be

relatively simple and stable in character. If a business is complex or subject to constant

changes we’re not smart enough to predict future cash flows. Incidentally that

shortcoming doesn’t bother us.’

In 2002, Berkshire Hathaway disclosed that it had substantial minority shareholdings in

the following listed corporations:

◉ The Coca Cola Company (see case study)

◉ American Express

◉ The Gillette Company

◉ H and R Block Inc

◉ M and T Bank

◉ Moody’s Corporation

◉ The Washington Post Company

◉ Wells Fargo and Company


http://www.buffettsecrets.com/benjamin-graham.htm

http://www.berkshirehathaway.com/

http://www.buffettsecrets.com/sticking-to-what-you-know.htm

http://www.buffettsecrets.com/coca-cola-invest.htm




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With the exception perhaps of M & T Bank, these are all not only brand name companies

but also businesses that are relatively easy to understand. Some examples:

◉ The Coca Cola Company is the world’s largest beverage company, making and

distributing worldwide such products as Coke, Fanta, Sprite, Evian and Minute

Maid. It has been in business many, many years and is perhaps the world’s most

recognised name.

◉ American Express is a world-recognised name and makes its money through the

sale of traveller’s checks and its brand name credit card. It has been in business a

very long time and has a simple business model that even the most unsophisticated

investor should be able to understand.

◉ H & R Block is a worldwide firm that makes its money preparing tax returns for

people either unable or unwilling to do it themselves.

In Warren Buffett’s own words, he did not invest in these companies, and many other

successful investments, without acquiring as much knowledge as possible about the

company, its business, its management, and its financial position. He has advised

individual investors to do the same, as did the great economist and successful investor

John Maynard Keynes.

As Warren Buffett has said, he knows and admires Bill Gates and the Microsoft

Corporation but has never invested in it because he does not understand the way that

the company works.

It will serve you no good to approach a financial investor with scanty information about

your business proposal in the hope that their relationship with you in the past will earn

you the right to their hard earned cash. It is true that some people will invest in a business

without due cognisance of the advice of the savvy investors; however, they often do it at

their own peril and in many cases they lose their capital.


http://www.buffettsecrets.com/case-studies.htm

http://www.microsoft.com/

http://www.microsoft.com/




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Finally, savvy investors want to know about the people behind the business. Business is

about people dealing with people and so when it comes down to it the key ingredients

that make the people machine work should be present. What do I mean by the key

ingredients that make the people machine work? This is no other than the word TRUST.

Investors have to trust you to give you their money. They cannot part with their money if

they do not trust you. Let me ask you a quick question, will you invest £100,000 in a

business you do not believe in or for that matter join forces with a business owner you do

not trust? People sometimes make the mistake of divorcing themselves from their

business. They think that they can live a life of reckless spending of their monies or other

people’s monies without paying a price. Trust is so important when it comes to

developing relationships of any type and so it is important we spend sometime now

exploring this subject and its impact on your ability to raise capital. I once witnessed an

event that brought this home to me. A savvy entrepreneur had spent years inventing

equipment that should save time and money for holidaymakers who need their plants

watered in their absence. The entrepreneur’s product was presented to investors with

ready cash to invest and with a willingness and eagerness to invest. The young

entrepreneur wowed the investors. All of them wanted a stake in this business, as it was

clear the business has a huge market that will benefit from the equipment. This

excitement was short-lived when questions where asked about the patent right of the

equipment. His responses were ambivalent; they became less clear as the questions come

pouring out from the investors about the issue of patent. The entrepreneur was less than

sincere over what he was selling. What he failed to disclose right from the onset is the

fact that he has already sold part of the right to his equipment elsewhere and that he was

infact seeking further seed capital for is a smaller portion of his business. One by one, the

investors withdrew their initial offer and the entrepreneur left empty handed.

Make no mistake, your integrity with money and personal relationship with money goes

along way in the decision on whether or not to invest in business. In the book “Think and

Grow Rich”, this is how Napoleon Hill put it- there is no substitute for honesty. One may

be temporarily dishonest by force of circumstances over which one has no control,

without permanent damage. But there is no hope for people who are dishonest by choice.

Sooner or later, their deeds will catch up with them and they will pay by loss of reputation

and perhaps even loss of liberty.





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Your credit history is therefore checked for these reasons by financial investors because

it says something about how responsible you are with managing your own money. If your

credit history shows you owe lots of money and you have not paid some of them and

worst still have been bankrupt in the past leaving the legacy of bad debts behind you, you

can be rest assured that this will come back to hunt you if you do not clear it up. Why?

This is simply because it shows that you cannot manage money wisely and so it is more

than likely you will take a similar approach with other people’s money. This does not

mean that just because you had a poor credit rating or had been bankrupt, you will not

be able to raise finance. However, what this simply means that you will be less trusted

with money until you clean up your act.

In conclusion, now that you have some understanding of the needs of financial investors,

you should be in a much better position to understand why they are not easily disposed

to part with their money. No doubt, this knowledge should help you in your preparation

to become finance or investment ready so that you can accomplish your business goals.

No matter what the majority of people may want you to believe, the truth is this, there is

no shortage of money in the world. Money flows to those who have something to give in

return for it and of course it detracts from those who have little or nothing to give in

return for it. You now know what investors need for you to leverage your business idea

with their money and it is up to you to take the most appropriate actions to develop the

right foundation for your business to become finance and investment ready.





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Chapter Four : Different Sources Of Finance For Business

ow that you know what investors’ needs are, let us look at the different sources

of finance that can be tapped into by new start up businesses and established

businesses seeking to grow.

In practice finance can be raised from a number of sources.

You the founder of your business can raise money through savings that you have set aside

specifically to finance your business. I know many entrepreneurs will often say that they

are unable to do so because their day job is not exactly earning them a huge pay cheque.

This may be true, but there are steps you can take to make this happen for you. Someone

once said the size of your income would be determined by the size of the problem you

solve or the number of people you serve. You cannot expect to earn more money than

the value of the problem you are willing to solve. If you want to increase your income so

that you can save money to invest in your business there are two ways you can do so

outside getting money from a third party- you have to increase your income or increase

the amount of money you save. Stealing is not an option, unless you are planning to spend

time where you ought not to be.

It never ceases to amaze me when many entrepreneurs come up with business ideas they

themselves are not willing to invest their own cash into. I often wonder why someone

may even consider approaching an investor for money to embark on a venture they

themselves have not invested their hard earned cash in. In my opinion, not only do I

consider this to be somehow foolish ambition on the part of the entrepreneur, it violates

one of the core principles for wealth creation as advocated in the book “THINK AND

GROW RICH”. In this book, which contains strategies used by well over 500 entrepreneurs

to amass financial wealth through various business ventures, you will find details of 30

causes of failure under the chapter titled “Organised Planning”. I want to share two of the

failures that you ought to avoid at all cost. They are:

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1. The habit of uncontrolled desire for something for nothing- this gambling mentality

will surely lead you in the path of failure.

2. The habit of indiscriminate spending. Do remember that spendthrifts cannot

succeed mainly because they stand eternally in fear of poverty. In stead you are to

systematically save by putting aside a definite percentage of your income. Money

in the bank gives you a very safe foundation of courage when bargaining for the

sale of services

I will urge you to read “Think and Grow Rich”. Go to Business Support Solution

Membership site and join for free to access this resource and more. The website is

http://www.businessservicessupport.com/business-development.php .

Whilst on the subject of discussing how a start-up founder can finance their own business,

I want to share a useful book that is loaded with ideas on how you can raise additional

capital to finance your own business all by yourself. I know you are going to need a bit

more discipline to implement any of the advice given in this book but the fact is this, the

principles shared in the book works. You are going to find many real people who have

used the strategies shared in this book to supplement their existing income. I personally

know of people in employment who are using some of these strategies successfully. In

one case, the money earned in one day by the individual is more than three days salaries.

The book is none other than “The ABC of Making Money” by Dr Denis L Cauvier and Alan

Lysaght. You can identify hobbies of yours that can make you money, ignite unutilised

skills that others are looking for that can make you more money, sell old clothing, books

and other resources lying in your lofts or sheds that can be sold through Ebay,

Amazon.com and other auction markets.





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As you can see from the diagram on this slide, raising capital from the banks can be very

challenging for a start up business banks are very conservative in their lending approach

and would rather stay clear from start up businesses which statistics show have a 95%

chance of failure before their second or third birthday. With this in mind, I urge you to

seriously consider reading this book and utilising some of the tools shared as a strategy

for raising finance.

There are other avenues you can turn to as well, lets explore each in turn:

◉ Friends and family- this can be a cheaper option but be aware that your personal

relationship and business relationship is being entangled here. You want to think

very carefully before going down this road so that you do not find your social

relationship being impaired due to business decisions and results. This group is

more than likely willing to assume the greater risks associated with start up

businesses relative to other groups.

◉ Business Angels and capital ventures- these are private investors that are willing

to invest for a greater stake in the business usually as high as 49%. You want to

ensure that your business will benefit from their expertise and contacts before you

go down this road. There are obviously benefits and costs involved with this

approach and careful attention and consideration must be given to this financing

option before formalising your decision. Sometimes, an entrepreneur may have

hang-ups over issues of sharing decisions and giving up control; however, the key

is to weigh the rewards against the control you give up and ensure that the latter

exceeds the former. This type of finance may be suited for a new start up with

significant growth potential that calls for significant capital investment.

◉ Equity market –this involves private investors who invest in businesses for a stake

in the business. By stake we mean purchase of a proportion of the business. For

instance your business sells shares to prospective investors in the private market

or the public stock market for cash, which provides the most needed capital you

seek for development and growth. There are specialists who can support your

business in accessing capital through the equity market.





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Equity investors are defacto owners of the business but their level of influence and

control of the business is limited to the size of their holdings. Where a significant

proportion of shares are purchased in a business, equity investors known

commonly as shareholders will generally have a greater right to decision-making

that influence the direction of the business as well as its performance. It is for this

reason that many founders of businesses stay clear of selling too much stake in

their business except of course where growth will be weakened due to limited

access to capital. When a business goes into liquidation or insolvency, equity

investors are always the last to receive any payment. All other creditors and

investors such as a bank will be paid first before the equity investor. With this in

mind, it goes without saying that they are the greatest risk takers in the business

and for that reason expect the greatest rewards.

◉ Commercial financial institutions- typically, banks lend monies to businesses that

have an established track record with collateral to minimise their exposure. Of

course, like equity investors, they require return from their capital, which is

generally lower than the expectations of equity investors. Commercial financial

institutions have a low risk appetite and are usually regulated by a financial

services authority or equivalent. This means that they cannot engage funds of their

investors in very high-risk ventures without due measures to reduce the risks to

their shareholders. Banks unlike the equity investors do not have a stake in a

business other than the monies they lend businesses. Later we will look at some of

the financial ratios that banks will use to make an assessment on the financial

strengths of a business, It is so important that you have a clear understanding of

these financial ratios.

◉ Government Institutions loan funds- it is not untypical for government loan funds

to be made available to businesses that are unable to raise funds to start and grow

a business. Like bank loans, interest will need to be paid until the loan is completely

repaid. Most of the funds have a maximum time limit for repaying the loan. Such

funds are usually available via governmental enterprise agencies at the local

regional or national level. It is up to you to find out the available loan funds in your

region by making direct contacts with your county or local authority, as well as

libraries and enterprise agencies. The Internet can also be a good source of

information.





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◉ Business grants: This is another popular and highly sought after financing that

aspiring entrepreneurs find very attractive. In some boroughs, local authorities or

counties, small grants may be available to boost entrepreneurial activities and or

training support. Again the best place to start is to find out what is available is

directly from your enterprise agencies at a local, regional or national level.

I offer specialist services in assisting businesses to raise finance. For more information,

contact me via email [email protected].


mailto:[email protected]




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Chapter Five : Understanding Your Relationship With

Money

e have so far been exploring the needs of financial investors. We have

examined the pros and cons of the different sources of finance and you know

that you can raise additional finance from tapping into your unutilsed skills or

selling old stuff you have been keeping in your lofts and sheds through auction sites such

as Ebay. I now want us to turn our attention to your relationship with money.

◉ Money is one of the most discussed subjects in our daily lives yet very few people

understand how to increase the amount of money that comes to them or how to

retain and multiply most of what they receive. The subject of personal financial

management is one that is not often taught in schools and the expectation is that

young children should be taught the subject by parents who often have little or no

understanding about the subject. Looking back, as a child, I can remember

countless discussions of my relatives that centred on the lack of money to fulfil the

demands and wishes of their children. It is not surprising that many children grew

up with a perception of lack and limitation in so far as money is concerned.

◉ I am sure many will attest to the fact that their knowledge of taking credit and

managing credit were all based on self-education. To put it bluntly, trial and error.

With such self education comes massive errors of judgement which very often

result in people living well above their current income, and what is more spending

on items which do not put money into their pockets but rather on items that take

money from them in excess of the value of their purchases. I know this because I

have been there myself and so I am speaking directly from my personal experience

and that of those that I have a relationship with as friends, relatives, colleagues

and clients. Nothing can be worse than finding yourself with debts and a bad credit

history due to ignorance on your part. Walking away from it all can be an option

but it comes at a price. I remembered doing a short presentation about raising

finance to a small group of entrepreneurs one night when I was challenged by one

of them that he sees no reason why they should be penalised by financial investors

for bad credit history.

W





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He sighted well-known businessmen who had filed bankruptcy and later came back

and succeeded in business. In his view if these businessmen can do it so can he. I

was very sorry to hear him speak in this manner. One thing he failed to understand

is this; he is not privy to the actions these bankrupt individuals took to clean their

credit record before they came back up to use his terminologies. He failed to take

account of the humiliation these individuals suffered because of their bankruptcy.

I have heard successful businessmen share their stories about their bankruptcy.

None described the event as something that was not painful. Many cited that not

only did they have to downsize their lifestyle they felt humiliated but recognised

that life does not stop at that point. It was the entrepreneurial spirit in them, which

helped them to learn from their mistake, and took them back to the top of the

ladder as opposed to what this man was trying to convince himself and others

about.

◉ What is your attitude towards money? I remembered when I was first asked this

question; I thought I had a positive attitude towards money and how wrong I was.

I want you to think very carefully about this. What does money represent to you?

What is the value of money to you? Do you always think about spending money?

Do you always think about creating the means of attracting money? Do you think

that money is something that should work for you? Do you think that you should

work for money? Do you frequently complain that money is hard to come by? Is

your bank account always in the red? What is your perception of money?

◉ I want you to take fifteen minutes and answer these questions before you move

on. After you have completed this section of the course, you may want to come

back and answer these questions again. You may find that your attitude towards

money will change slightly or significantly by the end of this section. Of course, it

is also possible for your attitude to remain unchanged.

◉ If you are to become savvy with other people’s money, you must first learn how to

manage your own money. I fervently believe that no one can give what he or she

does not have. You can only give others what you have.





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So, if you are seeking finance from an investor, promising that you will repay the

money back in full with interest or provide them with a vehicle to create more

money for themselves in excess of their investment within a reasonable period,

then you must be able to demonstrate that you are capable of managing their

money. This is why banks check your credit history before deciding whether to give

your any form of credits; if your credit rating is fine, it shows that you are

responsible with money and of course the converse holds true where your credit

rating is weak.

By now you should have completed your answers to the questions asked. Make no

mistake; the answer to each question will begin to tell you something about your beliefs

and attitude towards money. It is important that you tackle wrong beliefs and attitude

head-on as opposed to living them buried in your subconscious mind or conscious mind.

Leaving them unchecked when they are doing damage to you and to those close to you is

not a wise option.

Let us begin by exploring the definition of money, how it is created, why some people

attract money and others repel money and beliefs that will keep you struggling endlessly

for money and constantly in debt.

Money is the reward for services and goods offered to another person or business. No

one can retain money if they fail to earn it through services or products they offer a third

party. This is why when people steal from others; they cannot retain the money for too

long because they have violated the principle of earning money. This is why when you

borrow money you must repay it or face the alternative of having a bad credit history.

This is why many lottery winners often find themselves more broke than they were before

their winnings because they have violated the principle of what money is. This is why

money continually flows toward people who produce goods and services and flows away

from people who only consume goods and services. Therefore, if you want more money

to meet you needs, you must create services and products in monetary value that exceed

the value of your needs or equal the value of your needs.





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Generating money through services and products you provide will not automatically lead

you to have more money in your bank account. The reason is simple. If you are spending

more than what you earn then you will be worst off than those that earn less than you.

You have to be cautious in your spending habits recognising this rule. Of course this does

not mean you should be a miser as such a practice only serves to reinforce a poverty

consciousness. It simply means that you must recognise how much money you have

coming in vis-à-vis your outgoings. If you want to spend more, then create more. It is as

simple as that.

Overspending is a negative attitude toward money. It shows that the value of money is

not well understood in the mind of the spender. The spender lacks the understanding that

every penny spent over and above their income has to be repaid with a price, usually

interest charges. Take for instance the tips for good money habits given by Mark Victor

Hansen and Robert Allen in the New York Times Bestseller “One Minute Millionaire”.

Do you know millionaires:

◉ Produce monthly budgets and control their spending within their budgets

◉ Regularly record all their spending and income

◉ Keep copies of their receipts for reconciliation to the statements

◉ Give 10% of their money to a charity of their choice which can be a church, school

etc

◉ Keep the spending below their income

◉ Continually look for opportunities to make money work for them

Read through this book and learn some more about this.

Not educating yourself about money can be the greatest disservice you can do yourself.

You pay a high price for your ignorance and you have no one else to blame except

yourself.





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The first thing you need to know is that it is your responsibility to educate yourself about

money. Money is very often seen as a taboo subject and it is no wonder many go off

spending money they don’t own on items that depreciate the moment they buy them.

Think about this very carefully. There are two types of spending you are making whenever

you spend apart from your basic needs which are:

◉ Food

◉ Shelter

◉ Clothing

You can either spend on items that increase your assets and by asset I mean things that

will create money for you in the future such as investing in real estate or your business.

The alternative is this; you spend on liabilities, which represent items that are going to

take money from you. Buying a car whilst great, does take money from you and you need

to ensure that you have the money to pay for it; otherwise it becomes a heavy burden.

Don’t get me wrong, I have a car myself all I am saying is that you should have a means to

pay for it before you buy one because in truth it is not an asset, unless you re a car dealer.

Buying mobile phones and spending endless time using them to call everyone around the

world is not only an unproductive use of your time but this represents a liability to your

bank balance. Of course if you have the means to pay the bills use it as much as you can

– otherwise be mindful. Falling prey to sales people who are well trained to motivate you

to buy what you do not want or need through endless advertisement and credit offers is

another thing you need to watch for. If you can discipline yourself to say “No” to them

and only buy what you want, you will have sound control over your money. Remember,

every penny that you spend could be invested and could earn you more money in the

future. This series is not about teaching you how to invest your own money; rather it is to

educate you on how to attract finance for your business as well as help you to understand

your inner relationship with money.

I now want to turn your attention to charitable giving. Whilst I endorse wholeheartedly

the importance of giving, it has to be said that the discipline of giving is something that

you should also inculcate within you as part of your personal mastery over your finance.

Giving to people who are merely going to abuse your money is not wise giving.





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Giving to charitable organisations that are adding value into the lives of marginalised

people is wise giving. You have the responsibility to check out who you are giving money

to and for what. I remember reading this subject in one of John Maxwell’s books. He used

to be a pastor and is now a well renowned speaker and author of many leadership and

personal development books. In the earlier part of his career he was not very wise with

his money but his brother was. Eventually, he had to learn from his brother how to

manage his finance and one of the strategies he used was to contain his giving within 10%

of his income. One caveat I must add here very quickly, if you can afford to give more

than 10% whilst taking care of all your basic essentials as well as retirement income, by

all means go ahead and do so. Otherwise, use 10% as a guide for your giving until you can

afford to increase it.

If you hold beliefs that are contrary to the ones shared here, I urge you to carefully

examine them and ask yourself these questions:

1. What is the origin of this belief

2. What was the spirit behind the belief

3. Are there evidences around me that contravene these beliefs

Be ruthless in your examination to free yourself from any guilt. Taking control of your

finance will help you control the finances of your business as well as those entrusted to

you by financial lenders and investors.

I ask that you list your income and expenditures for a typical month. You will find that

some of the information will be easy to list, whilst others might require some research.

You may be one of those who find it difficult to remember the amount spent on certain

items and you will need more time to check your bank statements or bills before they can

complete your personal financial statement confidently. In a worst-case scenario, you

may not have a copy of your bills or credit card and bank statements, and it will be near

impossible for you to answer the questions asked here.





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If you are not able to do this exercise immediately, I will ask that you spend some time

finding your receipts, bank statements, credit card statements, cheque books, and pay

cheque slips, and then start the process of completing the table. You may wonder why

you should do this; well, let it be known to you that it is very difficult to implement skills

in your business that you do not practice personally. When you can master the act of

personal financial discipline through accurate accounting of your personal spending and

income, transferring that discipline into your business will be seamless. Therefore, I urge

you to complete the table. You may be frightened to find out the truth of your spending

habits. I want to encourage you to tackle this head on. You are not going to take control

of your financial discipline or habits if you shy away from this process.

Completing this table will help you to record your personal income and expenditure for a

typical month so that you can begin to gain a clearer picture of your incoming resources

against your outgoing expenses. In addition, you will immediately find that the

information in the completed table helps you to determine whether your expenditure is

kept within your monthly income, and if not, the amount of monies you owe others due

to overspending. If you cannot complete the table immediately, make a decision to keep

copies of all your bills next month and then complete the table thereafter.

Do you know that successful entrepreneurs value money and treat money with respect?

Do you know that anything you do not value will eventually not be attracted to you? As

far as money is concerned, wealthy people are good at seven money skills:

◉ They value every penny in their possession, because a penny has the potential to

grow when properly invested.

◉ They control their money down to the last penny.

◉ They save at least 10% of the money they earn.

◉ They have a system for investing money.

◉ They have multiple sources of income outside their main job.

◉ They protect themselves with legal entities.

◉ They donate at least 10% of their income to businesses, churches, or other good

causes.





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If you are serious about building a successful business, you will do well by respecting good

financial management skills.

Assuming you have completed your personal financial statement table, I urge you to

answer the following questions:

◉ Do you regularly check your bank statements?

◉ Do you regularly keep your receipts after making a purchase?

◉ Do you regularly check whether your salaries have been paid into your bank

account?

◉ Do you regularly check whether the amount on your payslip and your bank

statement is the same?

◉ Do you regularly check whether cheques you have paid have been cleared from

your bank?

◉ Do you regularly check the interest paid in your credit card statement for accuracy?

If you answer “Yes” to at least four of these questions, then you currently have a fair

amount of financial discipline in your life, and you may find that it is easy to grapple with

the importance of learning financial management skills. On the other hand, if you

answered “No” to at least three of the questions listed, you are going to need to practice

personal financial management discipline immediately, so that you will find it easier to

handle the money side of your business.

Let me ask you some more questions on the subject of personal financial management:

◉ Do you produce a monthly personal budget?

◉ Do you check that your spending pattern is within your monthly personal budget?

◉ Do you ensure that every expenditure you make adds value to your life and is not

done sporadically?

◉ Do you value money and treat every penny you have with respect?





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If you answered “Yes” to three out of four questions, then you are fine. Otherwise, you

are going to start learning to take control over the management of your personal funds.

Why? If you are going to manage your business’s finances efficiently, the starting point is

your personal funds. You cannot suddenly become a great manager of your business

finance when you have not been exercising similar care over your personal finance. You

can get an accountant to do your books, but such an action, by itself, will not guarantee

financial success if you are careless with spending and you are not seeking opportunities

to invest spare cash. I hope you understand this point clearly. Many books on how to raise

finance focus on teaching entrepreneurs accounting, instead of helping them achieve a

sound personal mastery of financial discipline. The approach that I take is different. I

know for a fact no one can produce results without planting the seeds associated with the

results internally. Good financial results do not happen by accident. Bad seeds will only

result in bad results and vice versa. Even goods seeds don't produce good results in the

wrong atmosphere. There has to be a grounded principle of sound financial discipline

that is internalised in the first instance before the development of technical knowledge

can assist in bringing forth the right results. Try producing apples without first finding the

right apple seeds and planting them in the right atmospheric condition (soil, weather

conditions etc) necessary for growing apples. You must first learn financial discipline over

your own funds first, so that you can do the same with funds invested in your business. I

teach you to value money first, because it represents a part of your life. It represents the

reward for the time you spent learning skills that you now use to provide services or

products. It represents the time you spent researching and developing your services, as

well as delivering them to customers. Money is the currency used in the humanly

dimension for exchange of goods and services you need. You need to have a clear

perspective of what it means and know it is representative of how you have spent your

time servicing others. Let us now move on to review another tool for building your

personal financial mastery skills.

Now that you have recorded your income and expenses for a particular month, I urge you

to estimate and record in this table the income you expect to receive in the following

month, at least five days before the start of the month. Then estimate your expenditures

for that month, making sure that you include allowances for unexpected events, which

accountants refer to as contingency allowances. This simple process is what is known as

budgeting.





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At the end of the month, you also need to check whether your expenditures and income

were in line with your budget, and you must hold yourself accountable for any

irresponsible expenses.

A word of caution: allow me to repeat this point one more time, if you are going to be

financially wise, you need to quickly determine and distinguish between necessary and

unnecessary expenses. You need to cut out impulsive spending habits and thoughtless

decisions that more often than not result in reckless and irresponsible spending habits.

You need to understand the difference between assets and liabilities, which was

described in earlier sessions. In short, you need to ensure that a significant amount of

your money is spent on assets (items that will put money into your bank account, such as

knowledge, skills, experiences, database, shares, options, real estate and more) and you

must reduce spending on liabilities (items that will take money out of your bank account

and deplete your cash reserves). This means that you will have to resist the desire for

instant gratification and move towards a smart way of living.

I urge you to use this system to start practicing sound financial discipline over your

personal finance. Ensure that you follow sound and proven practices, and stay clear from

practices that will expose you to unnecessary financial risks. Final words of

encouragement- do not beat yourself up if you find yourself straying from good habits.

The habits you have formed to date cannot be changed overnight. They form your current

mental thoughts pattern and can be changed with determination, willpower and help

from a higher power which in my faith I refer to the creator of the universe.

Now let me repeat this one more time; The first step you need to take is “Make a decision

to effect a change” in your life today.

The second step you need to take is “Make up your mind to manage the decision”. You

need to set a clear date that you will start and monitor your progress steadily. You may

even want to be accountable to someone with your best interest in mind.

Decisions are easy to make but managing them so that they can be implemented and

yield the desired result is quite another thing.





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Over the years I have learnt a number of tools to effect desired changes in my life. To

summarise:

◉ I will call upon the help of the creator of the universe and then write affirmation

statements in support of what I want.

◉ The affirmation statements are then repeated regularly each day with a feeling

tone that I have already received what it is I affirmed.

◉ I will also visualise myself already in possession of the thing I affirm until I physically

manifest it.

◉ I will stay clear from comments that contradict my affirmation and contacts with

negative vibes that have the power to undo or slow down my effort to effect the

change.

In Think and Grow Rich, you will find that great entrepreneurs like Thomas Edison,

Andrew Carnegie, and Henry Ford used this approach to achieve their desired outcome.

Here are some affirmation statements you can read twice a day to help you build a

personal mastery over your finances:

1. I am so happy and grateful now that I have total control over my finances

2. I am so happy and grateful now that my expenditure is consistently below my

income

3. I am so happy and grateful now that I am wise with my spending and investing

surplus cash in profitable investment vehicles.

You can go ahead and create your own affirmation statements. However, be sure they

are positive affirmation as opposed to negative ones.

Affirmation statement by themselves will not help you if they are not backed up by strong

faith and confidence that you will achieve what you affirm. Whatever the mind can

conceive and believe the mind can achieve. Notice, conception must be backed by belief.

Your feelings and emotions as you repeat your affirmation statement matters.





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Your results are always going to be in line with your deep emotional beliefs. Sorry I have

to bring this out to you bluntly. You must not only see yourself already in possession of

what you affirm but also feel the emotions that go with that achievement. This is one of

the greatest challenges that many have because our education system teaches us to react

to what we sense with our five senses, when infact what we sense is a product of our past

thoughts.





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Chapter Six : How To Wow Financial Investors

o how can you wow financial investors? Investors as you know are looking for

vehicles to make money. So if you want to wow them you need to learn their

language and speak it fluently when you engage with them in conversation.

Your starting point is to develop a business idea that is marketable. As far as possible,

your business idea must be protected against intellectual capital infringement to ensure

it can be capitalised. This is not always possible for all business types. However, you

should actively seek ways to differentiate your business from the rest in the industry by

creating a unique selling preposition, which will create a wow factor when presented to

investors. Think about Amazon.com; at the time it was started, there were lots of

bookshops around just as they are today. The idea of having a massive online bookshop

where people can buy books on the Internet would have been inconceivable but in all

fairness the idea was extremely different in its industry. What sets it apart from others is

Amazon’s capacity to sell cheap books very fast through the infrastructure of its business

model. Always remember that you must have a product or service that a market can pay

for at a price that generates a decent profit after all direct costs and overheads are paid

in full.

All of what I have said so far can be easier said than done. Monetising your business idea

is something that may require the investment of significant time and effort on your part

to put you on a platform for success. The real reason why many entrepreneurs cannot

wow investors is because many of them do not have a wow idea; they do not have an

idea that is different from the competition because they do not want to spend time

developing the idea and protecting it. In many cases, they opt for the easy option of

copying another business concepts only to find themselves struggling for customers or

making huge losses.

In practice it is not unusual to find a business idea that in itself may not be a wow idea.

Setting up a Mediterranean café business may not be a wow idea; however locating it in

an area with a huge market, where there are no other Mediterranean cafés will certainly

make a wow impact in the minds of financial investors.

S





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Let us now look at other factors you need to bring in your pot to wow financial investors.

A sound idea on its own may not be sufficient to motivate investors to part with their

money. You must demonstrate that you and your team have a strong knowledge of the

market you want to sell to. This calls for a respectable amount of research on your or

your team’s part. Financial investors are always impressed with market knowledge. One

of the greatest crimes you can commit when seeking finance from an investor is to

demonstrate lack of knowledge about the market. I remember asking an aspiring

entrepreneur who attended a workshop I was presenting what is involved in putting

together a compelling business plan. The entrepreneur stated that he was going to start

a business in bakery. When I asked what his experience or knowledge of the industry was

he said he knew nothing about the industry but will be going to a college to learn how to

bake bread. Upon asking him what kind of bread he will bake, where he will locate his

shop as well as what makes him think residents in his proposed location will choose to

buy their bread from his shop as opposed to getting it from a supermarket, he was

speechless. After the workshop, he did thank me for these questions and indicated that

he will need to think through his business idea again. It is important to note that in this

particular situation, this aspiring entrepreneur has far more work to do with developing

the business idea. The trouble is, there are many who go to the market with undeveloped

ideas such as the one I just described and are shocked when they find no one to invest in

their business idea. My specialist area amongst others is to help entrepreneurs develop

their business ideas into a solid business. To assist them through coaching, mentoring or

workshops to achieve a solid business putting in place a business plan that is well

researched and then assisting with finance. Whilst I work with all gender type, I have a

commitment to assist women aspiring entrepreneurs and business owners.

OK, enough of all this now, let's look at other areas that you need to deal with if you are

to wow financial investors. I want us to look at two areas in particular:

◉ Your business team

◉ Your financial projections

It is a well-known fact that no one can achieve any thing of significance by themselves.

You need to work with others and so you need a team. When you join our Business

Support Solution Membership Programme for free, you will get access to EBooks that will

guide you on how to create a team.





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Financial investors are always interested in knowing who is involved in your business. This

is because you need to demonstrate their credentials and integrity in delivering the

services or products that your business sells to the target market. If they are

uncomfortable about the quality of the team, regardless of how good the business idea

is, they will doubt its viability. It is people that make business and so, you need to be very

clear about the credentials of those you will involve or those that are involved in your

business. In some cases, your quest for financial investors may be to attract their capital

and business expertise. You must be very clear about whether this is what you are looking

for so that you can communicate it to the investor from the onset. Earlier, we discussed

the different types of finance as well as their pros and cons. It is not always possible for

you to involve a financial investor in your business; therefore think carefully about what

you want and what type of investor will best suit your business needs.

Turning to the financial projection of your business, at the final stage, you want to

demonstrate that your business is financially viable. A step by step guidance on how to

put together a financial plan can be found in our Business Support Solution membership

site. You want to demonstrate clearly that your business has a ready market that has the

purchasing power to pay for the services and products to generate healthy turnover or

sales income, which will cover the costs of producing the services and products. Check

out the membership site and find out how to put together a financial projection for your

business plan. Everything you need to know about business planning, financial planning,

financial evaluation and monitoring, financial project appraisal techniques can be found

there..

For the purpose of raising finance, you must bear the following points in mind when

reviewing your financial projections:

◉ The assumptions for demands must be realistic

◉ The assumption for pricing should be competitive for the market you are targeting.

The target market must be able to pay for the products and services.

◉ The financial projection should demonstrate that you would generate healthy

gross profit and net profit margins

◉ The financial projection should demonstrate that you would generate healthy

profit that is at least twice the amount of interest you are expected to pay to any

private lender.





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◉ The financial projection should demonstrate that your business is not going to be

too leveraged.

So here are the typical financial ratios that investors will look at when evaluating your

projections for finance.

1. Gross profit margin- this is the proportion of your sales income that remains after

deducting the direct costs of producing the services and products sold.

2. Net profit margin- this is the proportion of sales income that remains after

deducting the direct costs and overheads incurred in the productions of the

services and products sold

3. EBITDA Cover- this is the amount of earnings available to service the debt. There

is a special calculation of earnings. Working back from net profit, to calculate

earnings you must add back depreciation and interest payment. In simple terms,

earnings must be sufficient to cover the cost of loans borrowed from the bank or

any other financial investor. Therefore EBITDA cover is simply earnings divided by

the interest payment. Most lenders will want to see earnings generated by your

business to be at least 2.5 times over the interest payment. This simply means if

your interest payment for the loan is £5000 per annum, you must generate

earnings of at least £12500. This is to ensure that your business can make profit

for itself as well as lenders. And of course there is sufficient buffer for the lender.

4. Working Capital- this is a measure of liquidity. It shows whether the business will

have cash to pay off its trade suppliers and staff as and when payments are due. It

is calculated by comparing current assets to current liabilities.

5. Gearing – this is a measurement of loans to value. It shows the percentage of

capital invested in the business that is loan. Most banks want to see a loan to

capital ratio not exceeding 60%. This is to ensure their loans are sufficiently

covered by the value of the business’ assets in the event that they choose to exit

your business due to problems of servicing the debt.

6. Return on equity capital- this is the net profit available after paying tax and

interest as a percentage of equity capital.





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Aside from financial projections, most financial investors want to see copies of your past

financial statements. They want to validate the viability of your business and if your

business is lacking in financial discipline you will have a hard time convincing them to

invest in your business. It is for this reason I have a separate training programme on

Finance For Non Financial Managers, which provides detailed information about how to

manage financial resources efficiently to build confidence in your business. There are

some businesses that find themselves being declined for loans by their banks simply

because their financial discipline does not instil confidence with their banks. I remember

a business that has been in operation for five years approaching us for assistance in raising

finance with a government loan scheme. The business has been turned down for finance

of £80,000 and the owner was distraught. When asked to send in a copy of the accounts

of the business, I was extremely taken aback to find that she had no clue about the

financial picture of the business. She has delegated the accounts to the accountant and

does not even know what the profit of the business was over the last three years. It is

hard to believe what she was saying. Needless to say I was not surprised at the decision

of the bank.

The capacity of your business to raise finance will be determined by a combination of

different factors:

◉ Your financial discipline in the past and how it reflects on your credit rating

◉ The financial discipline of your business, as demonstrated in the quality of its

financial records and accounts as well as its results

◉ The quality of your business idea and the strengths of the financial projection as

demonstrated by the evaluation of profitability, gearing and liquidity.

◉ The quality of the team that is involved in the business

Taking all the above together, your business plan for finance must be compelling. For this

reason, before concluding this series, I will quickly run through the characteristics of a

compelling business plan.





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The contents of a compelling business plan should include:

◉ The Description of your business

◉ Vision and mission statement

◉ Market Analysis

◉ Products and Pricing

◉ Analysis of resources required and what is currently available

◉ Analysis of external environment (PEST Analysis & Porters 5 forces) including

competition analysis

◉ Marketing and sales strategies

◉ Milestones

◉ Risk Analysis and Management Systems

◉ SWOT Analysis

◉ Financial forecasts- profit and loss, cash flow and balance sheet

Having a robust business plan for the purpose of finance is critical for business success.





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Chapter Seven : Conclusion

have now come to the end of this book. You now know how to develop strategies for

attracting finance for your business. Irrespective of whether you have bad credit rating

at present, in the UK, provided you have taken steps to arrange debt repayment plan

and the circumstances that caused the situation was exceptional, there are avenues for

you to raise finance. However, they will want to see that your business ideas are sound.

They will want to know the credential of your team and all the other areas covered so far.

Whereas security to support debt finance is important to banking institutions, equity

investors have a different approach as they are defacto owners of the business.

You need to take a view of what is right for your business based on where you are at

present. Using the knowledge you have gained in this series will go a long way towards

ensuring your business is finance ready. You need not concern yourself about the problem

of getting finance for your business; rather you must concern yourself with developing a

monetised business idea that will wow investors and set them falling over you to sell their

money.

Now test your understanding

1. What are the needs of financial investors and how do they take them into account

when making investment decisions.

2. What are the different sources of finance and what are their pros and cons.

3. Why are financial institutions or investors concern about credit ratings of

borrowers when making investment decisions.

4. What are some of the financial ratios that will be taken on board by lenders during

their investment or loan appraisal decision.

5. Why is it important that a business owner have the right attitude to money for

future success.

6. What systems are to be put in place to master personal financial discipline.

7. Taking into account your own specific financial situation, what action steps and

strategies will you take to get your business finance ready.

I





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Some of you may want to know about how to find cheap money for your business. I have

had many businesses asking about grants and government loans, particularly those who

are unable to raise finance from the banks or private finance market.

You will find all the information you are looking for to source finance from the market

included in our membership site for Access To Finance- Strategies For Attracting Funds

For Start-ups and SMEs. We have to update the member site regularly with the

information to ensure it is current and relevant.

http://www.businessservicessupport.com/business-development.php






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About the Author

Sheila is a business management trainer and financial consultant mainly assisting

businesses with the development of their business plans, as well as business management

skills. She has helped numerous businesses raised finance from main stream banks and

government subsidised programmes and have worked as part of the broker scheme for

Barclays Bank and Lloyds TSB Bank.

Sheila works with associates to deliver specialist training courses in finance and financial

management including procurement, leadership and business management skills. She has

trained thousands of directors and managers over the years, helping them develop their

business planning skills, as well as finance and general management principles. She

develops quality training packages for small businesses to access professional

management skills with which to develop their business operations.

Sheila has over 25 years experience in professional business management and leadership

skills and over the years has held a number of high public profile "Non Executive Director"

positions. She is a qualified professional accountant and a fellow of the Chartered

Association of Certified Accountants (FCCA), with a Masters in Business Administration

(MBA), as well as a Bachelors degree (Bsc Econ Hons).





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Sheila holds a Diploma in E U Public Sector Procurement and she is the author of personal

development publications, some of which are approved by high profile organisations such

as the Institute of Leadership & Management (ILM). Her book "My Business Is My

Business", which is endorsed by top international New York Bestselling Author Mark

Victor Hansen is a great resource for those who want to learn a set of well grounded

business principles for effective business development and growth and is accessible for

free by members of the Business Support Solutions.


You can get access to the video of this book as well as financial templates such as cash

flow forecasting, profit and loss and balance sheet etc inside the member's area.



Documents

Access to Finance - Learn how to source and raise business funds for growth