Raising Funds in Volatile Times

It is difficult — but not impossible — to find funding for a business in volatile economic times: Some investors are always looking for new opportunities. These investors might find a business attractive if it is in a sector that is robust or poised for growth. Investors also consider attractive a solid business plan with achievable goals, a talented leadership team and solid financials. Careful planning and preparation may connect investors to your company.

Here are five steps for preparing to find funding in an uncertain economic climate:

First, assess the growth outlook for your industry. Services that will experience the highest growth over the next few years include renewable energy, AI and automation, cybersecurity, fintech and online gambling, information technology, health care services and wellness industries, and construction, particularly residential remodeling. Each of these broad categories has many subcategories ranging from professionals (e.g., engineers) to unskilled workers (e.g., laborers).

Next, understand market conditions. The rise in interest rates has severely affected valuations. Small companies will be impacted even if they are looking for funding from traditional lenders — such as banks or the U.S. Small Business Administration — rather than angel investors or venture capital (as on “Shark Tank”). Venture capitalists are also more likely to want an ownership stake in your business in exchange for funding.

Third, implement measures that will enhance your financials, such as cutting costs. Examples of cost-cutting measures include a) taking advantage of common insurance bundles, such as a business owner's policy, which pairs general liability coverage with commercial property insurance; b) assessing whether staff is being employed appropriately and efficiently, including bringing in automation where possible; and c) letting current vendors (from the leaseholder to the office supplier) know that you are looking for lower prices; they may offer you a loyalty discount or you may find a better price elsewhere.

Attracting financing takes time, but it helps to be prepared. As a fourth step, be ready with a statement that outlines your business model, the reason you are requesting funding (e.g., buying inventory or hiring new employees) and profitability projections. The specific documentation will vary according to the type of loan and the lender but generally includes business and personal tax returns, bank statements, business financial statements (e.g., balance sheet, income statement and cash flow statement), leases, collateral and articles of incorporation.

Finally, develop a list of potential funding sources. Your current advisers may be able to introduce you to trusted sources interested in financing your business.
​
Financing your business can be especially difficult in unsettled times, but with careful planning, research and patience, it is possible to meet a financing entity's criteria.

Harik Thompson CPAs and Advisors is committed to providing exceptional service and delivering tailored solutions to meet our clients’ financial needs. Your satisfaction is our top priority, and we constantly strive to exceed your expectations. As part of our ongoing efforts to better serve our valued clients, we need your help. Your feedback is invaluable and will assist us in refining our services. It will also help potential clients make informed decisions about their accounting, tax, and advisory service provider. Please take a moment to share your feedback by leaving us a Google Review. Thank you very much!