BRIAN HOWES, the chairman of Finance Wales which was created to assist small to mediumsized enterprises to innovate and grow, argues that companies which fail to balance the elements making up theirfunding package, could pay a high price.
When a new business gets into difficulties, the cry often goes up that the venture was under capitalised from the start.
This may mean that the business was unable to obtain the backing it needed but it is more likely to mean that it is not investor ready and it was launched with either insufficient funding – or the wrong combination of financial elements – or both.
The failure of enterprises without enough funding is common. Optimism is high at the start of a new venture, often leading business people to look at the world with rosetinted spectacles. Inexperienced entrepreneurs particularly, get carried away with enthusiasm, blinding themselves to harsh realities.
But being realistic is not the sole requirement when it comes to funding a new, or growing, business. Businesses also need a good deal of understanding of the types of finance, why there are so many available and how they can improve their chances of success. They need to ensure that the sources of capital are the right ones for the right jobs, that they are complementary and balanced and that sufficient financial planning has been undertaken.
The aim of Finance Wales is to assist small to mediumsized Welsh businesses to make the right choice when seeking finance and to ensure that every penny is used to best effect. A range of financial instruments is available, such as small loans from pounds 1,000 for micro businesses, up to syndicated loan and equity investments that can run into several million pounds. Finance Wales also offers investment support once an investment is in place, which can include anything from monitoring the investment to providing a nonexecutive director for the company board, and believes funding and management support should be inseparable.
The first important step when seeking any finance is to prepare a robust business plan showing what the owners want to do and how they intend to use the additional funding.
Businesses should not be striving to impress at this early stage. If it is a straightforward business, the plan can be written on two pieces of paper. If looking for larger investment something more thoughtful is required. It is essential to pick the right mix of funding to suit their needs.
