It’s All In The Story

4 Apr

I received some emails from a few customers this week asking if Bilbus could connect them to cash.

One company had a large customer willing to pay it a guaranteed minimum per month (after invoice) over a 4 year period, and the company wanted to explore ways to get more of this cash up front so that it could use the cash to accelerate production and bring in additional customer sales.

Another had a different circumstance: its high street bank was pushing it to reduce its outstanding facilities and it was looking for working capital to trade its way out of its current situation. For a number of reasons, its sales had been declining and it recently ended up making a loss. Having made some tough decisions, the owner felt that a combination of turnaround measures (cost cutting, getting out of low margin business, better customer and product targeting) was working –  what he needed was working capital to trade his way back to profit.

These businesses had preliminary conversations with lender or two, and did not feel confident they would get what they needed. It could be that the lenders they were talking to were not appropriate for their situation. Or it could be that their story was not being well received. Either way, we wanted to widen their options through Bilbus.

Asking them a few questions, I got enough of a picture to form the view that they could find financing, albeit with a bit of work.

Doable. Difficult, but not impossible.

Key is being able to find the right lender(s) and then show them the path to repayment. The right story even in difficult circumstances, is fundable.

Having a good story is not a one-off. It requires maintenance. Having a good handle on invoicing, collections, cash position is critical. Bilbus gives businesses the tools to do this.

What is also key is keeping good financial and accounting records, knowing where your sales are, for what products, and for which customers.  And of course, what your margins and profits are at product as well at company level   (here, our accounting partners do a fantastic job in giving the business what it needs).

Businesses can improve their record keeping and manage their cash flow, invoicing and collections better. But when pitching to the lender (make no mistake, just like customers, investors and even employees – lenders also need to be sold/convinced even if lending is their business), the key facts are not always apparent and need further questioning to come out.

I will put together a series of posts on ways to find the right lender and include some tips from commercial lenders on what makes it easier for them to evaluate a business’ prospects.

For now, 4 headings I believe any commercial loan story should have (over and above the financial statements lenders will need to see):

  1. Who are your customers (corporate, business, government, individual) and what portion of their business they represent (roughly where do most of your sales come from)?
  2. What have you borrowed already (lenders need details, so if you want to leave names out at the initial stage, you still need to give them an idea of what your obligations look like)?
  3. What do you need the funding for and how will you use it (customers paying late, need cash to fulfil a new large order, buy new equipment, hire new people, temporary downturn, refinance existing facility etc.)?
  4. How you will pay off your debt and make a profit (increased sales, market advantage, cost cutting, confirmed orders etc.)?

Bilbus is a working capital platform that enables small businesses to invoice, collect and connect with commercial lenders via a single dashboard.