As we covered in our last blog, the business lending community is increasingly focused on government-backed emergency loan schemes and are making fewer loans outside of those schemes. The number of lenders involved in the emergency loan schemes has increased rapidly – 105 lenders are now CBILS accredited, up from 40 in April. 

It is now harder for businesses applying for loans outside of CBILS and BBLS to get their applications reviewed and approved. So, what do businesses need to do to give themselves the best chance of having their application approved?

It is crucial that businesses approach the most appropriate lenders and present their funding request in the right way if they are to secure what they need.

At Altenburg Advisory, we work closely with businesses to help them determine the most appropriate funding solution, and then draft funding proposals that fit with what they need and what a lender wants and needs to see.

While the exact contents of a funding proposal will vary and be tailored to the situation, each proposal needs to answer the basic credit questions:

  1. Why does the business exist, does the strategy make sense and is there an appropriate management team in place?

  2. What will the funding be used for, and is there a realistic and supportable plan that shows how the loan interest will be paid and the loan capital repaid?

  3. What happens if things don’t go to plan, how will a funder get their money back?

We have pulled together some top tips for businesses when putting together a proposal:

  • A funding proposal should be a concise document with a clear executive summary at the start to enable to lenders to quickly understand what the ask is, how the funds will be used and why it makes commercial sense for them to lend to the business

  • In addition to a base or management plan, the proposal should include revised or ‘sensitised scenarios’ showing how the business will perform under pressure, and what this means for the businesses’ ability to service and repay their debt. This is particularly relevant now with funders wanting to understand scenarios such as a drop in sales due to a tightening of the “lockdown” or a second spike in COVID cases

  • Show clearly how the funding will be used and, if other funding is coming in alongside the lender (i.e. equity), show a table of sources and uses of funds

  • Make sure a funding proposal is realistic – do not run before you can walk. It can be very frustrating for lenders when they receive funding proposals that are based on unrealistic assumptions and therefore do not make commercial sense

  • The proposal needs to be relevant and where appropriate tailored to each funder you are approaching. All lenders will have certain requirements that need to be met, so a proposal should set out how the funding ask meets these requirements

  • Although many lenders are focused on emergency loan schemes, there are still many alternative funders that businesses can approach. This is where debt advisory specialists can really help. The debt markets are very fragmented, so knowing which mainstream and alternative lenders would be the best to approach is key to maximising your chances of securing funding

Advisers can also leverage their relationships with lenders to ensure that lenders invest sufficient time in looking at a lending opportunity and are willing to work with the adviser to tailor the potential solution to make it work for both sides.

Altenburg Advisory is a debt advisory focused corporate finance firm, which works with established UK businesses seeking debt funding and broader independent corporate finance support.

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