Small business investment was down 11% in 2022. Here’s how to improve your chances of securing funding

As your business goes from strength to strength, you may want to support this growth by seeking funding from an external source.

External funding is an excellent way to drive your business forward, whether you’re hiring new staff, expanding your premises, or upgrading your equipment and services.

But securing that funding can be tricky. Small Business reports that investment in small businesses dropped by 11% in 2022, adding that it fell by 28% in the first quarter of 2023 compared to the same period in 2022.

In light of the increasingly challenging nature of small business investment, here are five practical steps you can take to increase your chances of securing the funding you’re looking for.

1. Keep documentation clear and up to date

When applying for funding, whether it’s a small bank loan or a more substantial sum from other sources, your business will be going under the microscope. The provider you’re applying to will want to be sure that your business is a good proposition and that you meet the eligibility criteria.

Having all your documentation up to date and clearly presented can make all the difference when it comes to your application. If the provider is unable to locate the specific data required to make their decision, their answer is likely to be “no”.

It’s also helpful to commit some of the key financial details of your business to memory so that you can present the facts clearly when interviewed.

2. Maintain a healthy cash flow

It’s often said that cash flow is the lifeblood of a business, and it hasn’t become a cliché without good reason.

A healthy cash flow is one of the signs of a well-run, profitable business and an effective, reliable business owner. Both are vital for providers who are deciding whether to award you funding.

Make sure you take the time to review your cash flow at regular intervals, iron out any challenges you’re experiencing, and optimise your processes so that your business can stay in the black.

This includes building up an appropriate amount of emergency cash reserves to draw on should you face any additional expenses.

3. Put an effective exit strategy in place

This one might sound a little odd, as what does your exit strategy – which may not be needed for another decade or more – have to do with your funding today?

The truth is, your succession plan is just as much a part of your business proposition as your cash flow, revenue, and assets. An effective and thorough succession plan can show funding providers – particularly investors such as angel investors or Venture Capital Trusts – their opportunity to realise the returns they hope to make on their investment.

If your investors can’t see how your business will grow their investments and enable them to benefit from that growth, they may be nervous about offering you the funding you need.

4. Make sure you apply for funding from the most suitable sources

There are lots of different types of funding that you can apply for, from government grants to crowdfunding, peer-to-peer lending to angel investors. With so many options out there, it can be hard to narrow down which to pursue.

That’s why it pays to take the time to research the different options available to you and find out which type of funding could be most suitable for your business. This can depend on:

Sector
Business size
How much funding you need
What you want to use the funding for
Whether you’re prepared to repay a loan
Whether you want to give away equity in return for investment.

It may seem obvious, but you’ll be far more likely to achieve your aim if you meet all the eligibility criteria for the funding you apply for. So, by taking the time to identify what’s right for you now, you could save time and stress in the long run by only applying for funding you are likely to qualify for.

5. Enlist specialist help to improve your chances of success

Even if you’ve achieved all of the above, working with someone who understands the process you’re going through can mean the difference between success and failure.

A specialist financial planner can help you to ensure your business is in the best possible position to receive funding, help you to identify the most suitable sources of funding, and support you through the application process. What’s more, they can also help you to achieve more of your personal and business goals over the long term.

Get in touch

If you’re looking for a specialist financial planner who can help you to realise your personal and business goals, please get in touch.

Say hello to us at [email protected], call us on 0161 541 2826 or submit a contact form on our website.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.