7 Ways To Make Your Small Business More Attractive For Funding

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Small and medium-sized enterprises (SMEs) play a vital role in South Africa’s economy, accounting for over 98% of businesses and providing employment to around 60% of the workforce. However, access to funding remains a major challenge for many SMEs, particularly when it comes to securing debt financing.

Lenders are often cautious about lending money to SMEs, particularly those that are relatively new or have a limited track record of success. Therefore, it’s essential for SMEs to take steps to make themselves more appealing to lenders.

In this post, we’ll discuss how you can make your business more appealing to lenders and increase your chances of securing funding so that you can continue to grow your business.

1. Keep Your Tax and Financial Records Up to Date

Lenders want to see that your business is financially stable and has a strong track record of meeting its financial obligations. Therefore, it’s essential to keep your tax and financial records up to date and accurate. This includes:

  • Filing your tax returns on time
  • Keeping accurate financial records
  • Maintaining up-to-date financial statements, such as income statements, balance sheets, and cash flow statements

By keeping your records in good order, you’ll be able to demonstrate to lenders that your business is financially responsible and can manage its finances effectively.

2. Develop a Comprehensive Business Plan

Lenders want to see that you have a clear vision for your business and a plan for how you’ll use the funding you receive. Therefore, it’s crucial to develop a comprehensive business plan that outlines:

  • Your business goals and objectives
  • Your target market and competitors
  • Your marketing and sales strategy
  • Your financial projections and cash flow forecasts
  • How do you plan to use the funding you receive

By developing a detailed business plan, you’ll be able to demonstrate to lenders that you have a
a clear vision for your business and a strategy for achieving your goals.

3. Build Strong Relationships with Your Suppliers and Customers

Lenders want to see that your business has a strong network of relationships with its suppliers and customers. By building strong relationships with these stakeholders, you’ll be able to demonstrate that your business has a solid foundation and is well-positioned to succeed.

Some ways to build strong relationships with your suppliers and customers include:

  • Providing excellent customer service
  • Paying your suppliers on time
  • Building long-term partnerships with your suppliers and customers
  • Offering discounts or other incentives to your customers

By building strong relationships with your suppliers and customers, you’ll be able to demonstrate to lenders that your business has a loyal customer base and a reliable supply chain.

4. Consider Working with a Financial Advisor or Consultant

If you’re struggling to secure debt funding for your SME, it may be helpful to work with a financial advisor or consultant. These professionals can help you to:

  • Identify potential lenders and financing options
  • Prepare your loan application and supporting documentation
  • Develop a financial strategy for your business
  • Identify areas where you can improve your financial performance

By working with a financial advisor or a consultant, you’ll be able to access expert guidance and support, which can improve your chances of securing the funding you need.

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5. Maintain a Positive Credit Record

Lenders will assess your credit record when considering your loan application. By maintaining a positive credit record, you’ll demonstrate to lenders that you’re a responsible borrower who can be trusted to repay your debts on time. Therefore, it’s crucial to maintain a positive credit record by:

  • Paying your bills on time
  • Keeping your credit utilisation ratio low
  • Checking your credit report regularly for errors or inaccuracies
  • Resolving any outstanding debts or judgements

6. Be Prepared to Provide Collateral

Many lenders will require collateral to secure your loan, such as property, equipment, or inventory or if you’re focussed on creative future-focused funding you’ll come up with creative solutions like taking sheep for a farm as collateral. It’s essential to have assets that can be used as collateral when seeking debt financing. You’ll also need to provide proof of ownership and valuation of the assets.

7. Consider Alternative Financing Options

No matter how much you try to look more attractive to large funders sometimes you just can’t get access to funding. Banks are large machines which have formulaic lending and unless a business falls into their cookie-cutter mould, it is too risky and time and energy-consuming to look into the complexity of leads that don’t fit their financing model. That’s why alternative financing is a great option. You could turn your invoices into cash with invoice discounting or get a business loan from a company that is more excited about your future than about its past and willing to work with you to find creative solutions to your funding needs.

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