Believe it or not, many finance and capital deals go sour at the eleventh hour, just before signing. This can happen for a number of reasons. But generally it is because something changed or some new information was presented that affected the terms agreed to during the negotiation process. Some typical examples are as follows:
- New information: One or more parties may have received information about the deal that makes it less attractive than originally thought. This is not as common during longer due diligence and negotiation processes. But it can occur in the case of a business owner/manager who is about to agree to terms that are far worse than a competing lender is willing to offer. If the business in question presents a very lucrative financial opportunity, the business owner/manager may have shopped his funding needs around and gotten a better deal at the last minute.
- External change: In many cases, the funding process can take time. During this time period, the market or other conditions external to the company may change dramatically. This can be positive if it involves losing a competitor through bankruptcy or acquiring a large new customer. Or it can be negative if it involves a huge swing in the price of certain raw materials required in manufacturing or the loss of a supplier of major customer.
- Internal change: A company may be undergoing restructuring as a part of its financial plan. With any change can come decreased morale or a loss of key employees. In some cases, this loss can also entail a loss of knowledge vital to the company (especially those companies involved in R&D or product development). Internal change can also involve the loss of a key resource such as a manufacturing facility burnt down in a fire.
- Cold feet: Business deals are done between people. In some cases, despite all the due diligence and good intentions, a deal can fall apart simply because one party is unwilling or unable to commit. This is less common as it is usually determined earlier on in the process how willing and committed both parties are.
There are many more reasons why a finance or capital arrangement might fall apart. Our representatives are able to help diagnose these warning signs and ensure a deal moves ahead smoothly and efficiently for both parties. Contact us today to learn more.
This is generally the most difficult step in the whole process because it is very hard to get your business in front of the right kinds of funders in the time required for your business to obtain the capital and finance it needs. This is because most financial deals go through a number of stages including:
- Vetting – where a representative of a funder looks at business opportunities and judges them on there potential and fit with the funders goals. Only the best opportunities make it past this initial filter.
- Engagement – Once a potential opportunity has made it through the filter and is vetted, the funder and business owners/managers must begin forming a relationship.
- Due diligence – Once the business relationship begins evolving and the funder is satisfied that there really is an opportunity backed by a strong leadership team, the funder may want to get more detailed and candid information about the financial status of the company as well as its history and outlook.
- Negotiation – Once the funder has confirmed that the business has financial potential as well as strong leadership, the negotiations begin. Any number of terms and conditions can be included in this process depending on the state of the business in question and how much capital is required.
- Closing – Finally, a legal agreement is created and signed which binds all parties to the terms and conditions agreed upon in the negotiation process.
It almost all cases, the relationship continues on from here as the funder will typically want regular updates on business progress and may even help the business resolve any challenges it is having through connections or access to resources.
A potential business deal can fall apart at any one of the above stages which is why the task of fundraising can sometimes seem daunting to small and medium-sized business owners. And, unfortunately, there are many different sources of capital so pursuing the wrong kind of capital can waste a lot of time and resources.
Our representatives can help you seek out the right source of capital to save you and your business precious time. Contact us today to get started.
This next step is critical. No lender will back your business unless you can put together a sound business plan. This plan may be different from any plan you’ve created in the past because, this time, you need to create a compelling business case for a potential funding source. You business plan will need to include the usual information about your business such as:
- Executive summary
- Industry overview
- Market analysis
- Competitive analysis
- Marketing plan
- Management plan
- Operational plan
- Financial plan
- And more
However, in this plan, you will also need to clearly state the following in order to satisfy the needs of your future finance and capital supporters:
- Clearly stated use of capital
- The rate of return an investor can expect to see
- The time required to repay the capital
- Any other lender or capital providers that already make-up your business’ capital structure
You may not know all of this information right now. Or you may not be willing or able to disclose all of this information at this time. That’s OK. We can work with you to help you create a sound plan that will give your business the best chance at gaining access to capital and finance. Contact us today to learn more.