Ricochet News

Small business funding: how to become attractive to investors

By Colin Timmis - May 21, 2018
Small business funding: how to become attractive to investors

Getting a business off the ground is no easy task. Small business owners face a range of challenges from connectivity to recruitment that can hamper growth and success. However, one difficulty supersedes all others: access to the right funding.

According to research conducted by Xero in partnership with World Wide Worx, 27% of South African small business owners cited access to funding as their biggest challenge to starting a business. It’s easy to blame or criticise the government or financial institutions for a lack of support. However, startups need to take a more proactive approach and consider how they themselves can improve their chances of securing investment.

The bottom line is that to attract investment, small businesses need to be the type of business that investors will want to part their cash for. For instance, if you have a clear overview of your accounts and can pull a financial report in seconds, then you’re immediately a more attractive option to potential funders.

Stay on top of the numbers

The funding application process is time-consuming and complicated. Small businesses have to submit a lot of company information – and then the funder has to check and verify it all.

One of the main reasons small businesses are denied funding is their lack of a solid business plan. This is often compounded by limited visibility into company finances which immediately sets off alarm bells in the would-be investor’s head.

To secure funding you need to inspire confidence – and to do that, you need to know your company’s current financial status quo off the top of your head. Before they invest in your business, investors will want to assess your cash flow, debt, and profits. You will also need to present a thorough business plan that outlines a calculated estimate of sales and profit projections. Bear in mind that potential investors will want this information upfront.

If you don’t have this information readily available, then you’re immediately at a disadvantage. It’s no good saving your financials on various spreadsheets across different devices. You need to provide investors with the latest numbers as and when requested – and in one easy to access format. This is where cloud accounting software can help,

If all your company’s financial data is saved in one central location you’ll eliminate the need to send emails back and forth - investors can simply pull the insights and information they need and review them accordingly. With easy access to important data, funders can approve your funding application far faster.  

This approach could benefit you in more ways than one. In reviewing all your company information, the funder could also identify potential risks in your business that you may not be aware of.

Ultimately, investors want to know what they’re buying into. To secure funding faster and more efficiently, you need to increase the quality, frequency and transparency of the information you provide funders. With automated accounting software, you can create a clear and shareable picture of your business. This immediately improves your desirability, investment options and speeds up the funding process.