Published: April 25, 2022
Commentary from David Chick, Director, Commercial Banking at Unity Trust Bank
At Unity Trust Bank, we continue to see a strong demand for funding from businesses, despite the pandemic. Organisations across a wide variety of sectors have remained focused on growth and are determined to realise their medium and long-term plans.
There are generally three main reasons that businesses look for funding. The first is acquisition. An organisation may grow physically by acquiring a new property, or by purchasing a new business to add to its portfolio. The second is organic growth within the existing business, where further infrastructure may be required, perhaps to add additional products or services. Finally, a business may be looking to invest in its workforce, research and development or marketing, or other intangible rather than fixed assets.
Whatever type of funding a business is looking for, the basics for a successful proposal are the same: a business needs to have a robust plan, with the owners and management team being absolutely clear on the objective, the associated financial requirements and having considered how the next stage of growth will be managed.
Where can you find funding for growth?
Keeping things simple, your first port of call should be your existing bank. However, if you don’t get the answer you want, what should you do next?
You could employ a broker to look for funding on your behalf, as they will be able to access a range of funding options and advise on the most appropriate for your circumstances. Alternatively, you might decide to undertake that research yourself but be mindful that looking for funding can be very time intensive.
Preparation is key
Securing funding can be a hugely important step in the growth of your business, but the process should not be taken lightly. Business owners should consider why they are doing it, what they hope to achieve and how they will manage the next step.
Sense-check your business plan and financial forecasts with your accountant first. Stress test the financials and make sure they are taking into account external factors, such as utility prices, inflationary pressures, changes to the supply chain, and any legislative impacts as a result of Brexit or coronavirus.
Other areas that funders are likely to consider include where your business sits in the marketplace, and the strength of your competition. Where does the balance of power sit between your business and your suppliers, or customers? Do you have a consistent and reliable supply chain? Where are the raw materials coming from, and is surety of supply guaranteed?
To what extent are your products and services sustainable? Could they become obsolete, and is there longevity in your business model? Is your workforce stable and resilient when it comes to change?
A funder will want to see that you have a robust management structure that is tried and tested. What is your business’ succession plan? At some point the owner will want to exit. Are they critical to that business, and if they are, what is the plan to exit? If not, do they have a timeline to retirement or to wind down?
As a socially responsible lender, one of Unity’s key considerations when assessing a funding application is that every business has alignment to the UN’s Sustainable Development Goals. You can read more about those here. We fund projects that have a clear social impact and a meaningful effect on the people that benefit from them.
For example, we recently supported a dental practice group in Hampshire, The Dental Management Partners (TDMP), with funding to acquire another outlet and continue providing frontline and specialist services for the local community. We also lent £800,000 to contemporary arts charity, East Street Arts, to help open a vibrant arts hostel in Leeds, boosting local tourism and creating new jobs.
Whatever your funding requirements and growth ambitions, ensuring that you have a detailed business plan and a thorough understanding of the financial requirements to deliver your objectives is fundamental to success. To find out more about how Unity Trust Bank has supported a wide range of organisations to access finance for growth, take a look at our customer case studies.