GETTING THE RIGHT REFINANCING RESULT

By Julie Cuthbertson, corporate finance manager at RMT Accountants & Business Advisors

The old adage ‘cash is king’ remains as true in business today as it’s always been and it’s pretty much certain that, at some point in their lifespan, mature businesses are going to need to do something to review and realign their cashflow situations to help them move forward.

For some, this action will be required to support the next stages of their growth and development, while for others, it could be needed to simply improve their cashflow situation or a part of a wider rescue package.

Whatever the situation, the basic principles of refinancing a business are pretty much always the same and building an understanding of how the process works will give you a better chance of securing a successful conclusion.

In the first instance, an appreciation of how the business funding market works is essential.  The days of just having a few banks to approach have long gone and there are now hundreds of funding providers out there looking to offer business’s finance.

Each funder has their own criteria on which they make their decisions, as well as their own specific sectors of interest and their individual appetites towards balancing the risks and opportunities they face (which many have been formed by negative previous experiences over which you have no control).

Understanding where your business fits into the funding market, possibly with your professional advisors’ assistance, will help you focus on the sources of capital that are most likely to want to hear from you.

Once you’ve decided on your best options for success, make sure you build a credible case for securing the finance you want and, most importantly, have the numbers to hand which indisputably back this case up.

We’ve all seen hugely enthusiastic business owners wax lyrical on Dragons’ Den about how wonderful their company is and what huge rewards there are waiting for those that support them, only for their investment cases to fall apart when the figures they’re presenting are found to be lacking in either substance or detail.

The same fate will befall you, albeit in a less televisual way, if you haven’t got robust financial information in place on which potential funders can confidently make a decision.

When it comes to sitting down and discussing your business case with a potential funder, remember that you’re presenting yourself as much as anything else.

In the first instance, confidence in a business plan will grow if funders know they can have confidence in the management team that will deliver it.

Make sure you all have your key business messages down to a tee, are crystal clear on the purpose for which you want the finance in question and have anticipated as far as possible the questions that are likely to come your way.

It may, of course, be that despite all your efforts to get things right, you may not be immediately successful, in which case the key thing to remember is to not take it personally.

It can be deflating, but with the right support, advice and perspective, rejection can help you make a better case next time round.

Keeping your end goal constantly in mind, presenting your case as clearly as you can and making all the data available that any funder could possibly want will give you the best chance of securing the refinancing package that you’re after.

For further information on refinancing and all aspects of corporate finance, please call RMT Accountants & Business Advisors 0191 256 9500 or visit www.r-m-t.co.uk