Is your SME “investment ready”? Top tips to get funding

Lending expert Joanna Scott shares her insider insight on how small businesses should fully prepare in order to secure the best funding outcomes.

Our experts

We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality.
Written and reviewed by:
October 2023 update: funding is on the rise

A new report reveals that remote funding rounds are now offering new growth prospects, but at the same time, the process is leading to burnout among entrepreneurs. For entrepreneurs and small business owners, it’s important to strike a balance between seizing new opportunities and take measures to safeguard your team’s well-being in order to navigate this new and challenging landscape successfully.

Once an SME has carved out its next steps for growth, it is crucial to secure investment. Whether the aim is to add to the team, develop new products or services, or pursue international expansion, fundraising is an experience that is unique to each business and its specific needs.

Small is beautiful

While the banks were historically the first port of call for growing businesses with big ambitions, today SMEs can be let down by traditional lenders that often favour larger, more established businesses in their lending criteria. The nature of being a newer, smaller business might mean a lack of historic performance data and weaker revenues, which can work against them when banks are gauging the potential security of their loans. However, suitable funding for SMEs can be found from a variety of other sources, so it is crucial that growing firms are informed about the different types of alternative finance options available to them. They can then work on making sure the business is in the best possible position to secure this investment.

Where SMEs can find support

Amid concerns that lenders have closed their doors in response to the turbulent financial environment, there is always appetite to invest in strong, growing businesses – the challenge for SMEs, particularly if this is only their first, or even second fundraising round, is knowing where to turn to secure this support.

While traditional banks might not be the most appropriate funding source for less-established businesses such as SMEs, there is a diverse and growing alternative finance sector that has been created with these businesses in mind. From solutions that leverage the capital already tied up in the business – products such as invoice finance and asset based lending – to growth capital that amortises like a traditional loan and equity investment that raises cash in exchange for a stake in the business, there are plenty of options for SMEs that exist outside of the high street banks.

For management teams at the very beginning of their journey, a Google search of some of the above can be as good a start as any. Alternative lenders usually have websites catered to people just like you and examples of other businesses they have supported may offer inspiration as to the types of funding that would be a strong fit.

Starting conversations early

Once an SME has decided the next steps of its growth strategy, it is good to set the wheels in motion and begin discussions about how it might fund this growth. Preparation will give business leaders more time and more options, so they can make sure they are choosing the right finance option to fuel their specific plans.

It will also give the leadership team plenty of time to prepare pitches and documentation that maximise the chances of investment success. SMEs can gather the information that lenders will ask for in advance and ensure their growth plans are well-presented, realistic and backed-up by the data they provide. Taking the time to carefully plan shows investors that an SME’s leadership team is proactive and strategic and can speed up the process later down the line.

Seek the expertise of advisors

During the preparation stage, many SMEs seek the advice of an advisor. Lending advisors bring a wealth of expertise to the table, having worked with swathes of SMEs previously. They can assess the specific needs of a business, explain the pros and cons of various funding options and perhaps even offer an alternative perspective that business leaders had not considered before.

Using an advisor can help an SME get the most out of the lending process and increase their chances of meeting a good-fit provider. Advisors also have access to established networks and are therefore able to signpost SMEs to trusted and reputable sources of funding. Advisors that work specifically within the alternative finance space will also be able to provide direction on the unique offerings of different lenders, helping business leaders to weigh up these USPs alongside conventional metrics such as price, term and security.

Be realistic – forecast the facts

While optimism is usually an admirable personal trait, it is important to forecast the facts when pitching for investment. Over-leveraging is not in anyone’s interests at this stage in the process, so it is important to be realistic and articulate clearly the value proposition at hand.

SMEs should come equipped with accurate financial projections and a clear plan that outlines how they will use the investment funds in line with their growth strategy. Revenue forecasts, expenses, profit margins and profitability expectations can all help to make a pitch for investment more compelling. If there are risks involved, delving into how these issues will be addressed can help instil confidence in lenders that risks will be effectively mitigated.

Lenders need to know why a business’ plans for growth are solid, so it is up to those pitching to explain why the business is unique and what gaps in the market the business is aiming to fill with its plans.

In summary…

While there is no one-size-fits-all approach to pitching for investment, these tips will improve an SME’s chance of impressing lenders.

In short, SMEs should start early to give themselves as much time as possible to research, prepare and ensure that their chosen finance method will meet their needs. And for an SME that doesn’t know where to start, speak to the experts and take advice to help devise a solid fundraising approach that ticks every box.

Joanna Scott headshot
Joanna Scott - Chief Business Development Officer at Growth Lending

Joanna is Growth Lending’s Chief Business Development Officer and has worked as part of the Growth Lending Group since 2017. Becoming Managing Director in 2022, Joanna is now responsible for driving multiple business development streams for the business, including international expansion, product diversification and fundraising. Growth Lending is a provider of tailored funding for high-calibre B2B firms.

Growth Lending
Written by:

Leave a comment

Leave a reply

We value your comments but kindly requests all posts are on topic, constructive and respectful. Please review our commenting policy.

Back to Top