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How to make the right decisions about funding

Date Added: 31/12/2013  

Owners of small to medium-sized enterprises (SMEs) are no strangers to finding and managing suppliers. Securing funding can be seen as another form of supply that needs to be procured.

New or growing business may be wary of accepting external funding, especially if they have never done it before. They may be worried about whether they will be able to secure capital or unsure about where to look for it.

SME owners will already have the skills they need to find the right source of funding, they just need to draw upon this expertise to make good business decisions. 

To begin with, create a detailed specification of the type of finance that is required. For example, do you need short-term finance or a more long-term commitment? How much funding is needed and how do you intend to pay for it?

Answering questions like those above will help narrow down potential funding sources.

Taking time to carefully consider the type of funding that you need will mean that you are in a better position when speaking to potential suppliers. 

There are things you must consider when having these conversations, however. 

The actual cost of funding will be an incredibly important decision. You need to think about what will need to be paid upfront in order to secure the finance and when will you be required to pay? This could be the interest rate or you may be needed to leverage a stake in the business. The cheapest option may not be the best option for your business.

What kind of service are you looking for? Do you want a basic, no-frills arrangement or do you require a more sophisticated deal? One of the most important things to consider is what additional support an investor can provide, especially if your business is growing. Can the investor offer financial and operational advice, access to new networks of customers or suppliers? This type of service may not be attached to all funding options.

Also consider if their interests match your own and consider the quality of service they provide.

Using the skills honed when finding and managing suppliers will ensure you secure the best funding option.

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