Jon Hughes

How to build a successful funding relationship from the start

For SMEs, sourcing funding for growth is a big decision. Taking time to build a relationship with a funder may seem like a minor item on the list, but it is integral to long-term success.

For SMEs, sourcing funding for growth is a big decision. Taking time to build a relationship with a funder may seem like a minor item on the list, but it is integral to long-term success.

When the relationship is based on a deep understanding of your business, specific needs and the environment you operate in, a financer is better equipped to respond quickly and effectively. This flexibility will support your business as it continues to grow and tackle new challenges.

Find an experienced funder willing to lay the groundwork

Is your finance provider asking detailed or technical questions? More importantly, is he or she getting to know the business you built and nurtured? It is important to find a funder willing to lay the groundwork. Establishing the basic facts is important, of course, but detailed information about the way you work with your suppliers and customers can have a huge impact on securing a funding mix that will work. Experience here is key.

Choose a lender that understands your business

At IGF, we take enormous pride in thinking about the questions we ask each of our prospects to ensure a good outcome for both parties. However, the reality is that circumstances can change, sometimes without forewarning. Therefore, you need a lender who can provide flexible funding solutions based on a deep understanding of your unique business complexities.

Being entrepreneurial in our approach means we empathise with the changes SMEs face, and have the flexibility to be able to support businesses through planned and unplanned changes. We share more similarities with our clients than we do with banks.
Many lenders tend to group certain businesses in a particular sector together without understanding the differences between each of them. Recognising every business’s USP is important because that is what played a crucial part in their success to date.

Both parties must invest the time

Taking time to understand a business isn’t always easy, but it is important, and it is also a two-way street. The management team must commit time to explain their business and, as finance providers, we then need to take the time to structure a deal in a way that will actually work for both parties.

If a facility offered to your business appears too good to be true, chances are it is. The deal may lead to trouble further down the road. Similarly, if you need to adapt the way you operate in order to satisfy a lender, you’re likely to endure an uncomfortable relationship that may slow your business down.

Work with the decision makers to understand the timeline

The time it takes to obtain funding will be different for each provider. However, it is important to agree the timeline you’re working to and who is reviewing your request or proposal in advance.

All too often larger funding providers will tell you they are able to provide support followed by several weeks, or even months, of discussions. Overnight, however, that ‘yes’ turns into a ‘no’. Why? It’s unlikely that the yes has actually changed to no. In reality, your request for funding may not have been put in front of the real decision makers until now.

This chain of events can cause sizeable damage to a business. We believe a decision maker should always be in the room.

As you grow, your financer should grow with you

There is no shortage of finance providers in the market. However, it is worth investing the time to build a relationship with the right one. In the long run, this means the finance being provided is more likely to work for the business. As you grow, your financer should grow with you, providing even more flexibility in the future.

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