A good friend of mine works at an equipment financing company, helping essentially to make decisions on those who apply for loans. We often chat about her clients, at least as much as she is allowed to share, and I have to say that there are some truly horrendous stories which she does share with me. I have a little experience in this myself and I know just what she is talking about with regards to people coming in and trying to get money, despite not showing many reasons why they would be a sound investment for a company to make.
Given what we have been through this year companies do want to invest in order to get their businesses moving again, but they will expect that you really know what you are talking about.
One of the most important things that you need to learn before you go into any meeting looking for finances is exactly what you plan to spend the money on. No win the case of equipment this is slightly easier given the set cost, but you will still have to have a clear understanding of the cost of the transport, installation and other logistics of the purchase of the equipment. If you either haven’t done this work or you have simply forgotten your numbers, you cannot possibly expect anyone to be interested in investing in you.
State of the Business, Boost of The Equipment
At the heart of anyone who is lending money is someone who wants to know how it is going to be repaid. This is not just about making sure that you get some good negotiations with regards to a repayment structure and interest plan, it is also about showing the investor that you can get their money back to them. This is why you have to be able to speak comfortably about the state of the business and also about what the investment which you are seeking will help you to do. If a piece of equipment will boost your sales by X% then this is what you should be discussing in order to give the investor peace of mind that you can repay them when the time comes.
Ultimately it is absolutely critical that you know your numbers, that you have a very clear idea of how much money the business is making now, how much of that is profit and how much money you are forecasting to make in the coming months and years. As a business owner or a key part of the business it is critical that you have a clear understanding of what these figures are, because you have to instill a level of confidence in the investor which makes them want to part with their money.
It is true that investors want to offer you money in order for them to make money, that is after all their business. What this year has taught many however is that lending to businesses who don’t bring confidence, is a very bad idea.