We’ve had a few deals recently where finding the finance wasn’t actually the difficult part. We’d spoken to the business owner, understood what they wanted to achieve, gone out to the market and found a lender that was a good fit. The finance had been approved, the numbers added up, and everyone seemed happy with the proposed way forward.
However, right at the end of the process, somebody else within the business got involved – in this case, it was the finance manager. We were sitting in a meeting discussing a new facility which, based on the figures in front of us, was going to save the business somewhere between £1,000 and £2,000 a month compared with its existing arrangement. From our point of view it made sense, the owner could see the benefit, but the finance manager was much less convinced.
Now, we could look at that and think they were simply putting an obstacle in the way of a perfectly good deal, but to some extent, we understand it. If you’re responsible for the finances of a business and somebody you’ve never met suddenly arrives with a proposal to change the company’s borrowing arrangements, you should ask questions – we’d probably be more worried if you didn’t. The problem wasn’t that the finance manager was involved, it was that they hadn’t been involved early enough.
Start as you mean to go on
Business finance decisions rarely affect just one person – the owner or managing director might know what they want the money for and where they’re trying to take the business, but the finance manager or financial controller is often the person dealing with cash flow, payments, reporting and the existing facilities every day.
There might also be an external accountant who understands the historic numbers and the wider financial position of the company. And then there’s us. We don’t need to do any of their jobs and we’re certainly not trying to replace them but what Able brings to the table is knowledge of the lending market, which lenders are interested in which types of businesses, what facilities are available and how those lenders are likely to view the company in front of us. Put all of those people together early enough and you tend to get a much better result.
One of the reasons we like having a finance manager or accountant involved is that they can often answer the questions that really matter. What happens to cash flow at certain points in the month? Are customers taking longer to pay? Is there a large VAT or corporation tax payment coming up? Is the existing facility actually being used in the way everyone thinks it is? Are there seasonal pressures that aren’t immediately obvious from the year-end accounts?
They can also challenge us – if we’re proposing a particular facility, we should be able to explain why. What does it cost? What security is required? How flexible is it? What happens if the business grows faster than expected? Are there other options we considered and, if so, why didn’t we choose them?
Those are sensible questions and we’d much rather answer them at the beginning than discover at the eleventh hour that somebody important within the business isn’t comfortable with what’s being proposed.
Finding Finance shouldn’t be about protecting territory
When an external finance broker comes into a business, an internal finance person can understandably wonder why they’re needed. If you’re the finance manager, shouldn’t arranging finance be part of your job? At Able, we’d argue we’re doing two different jobs.
A good finance manager knows their business inside out, but we spend every day talking to lenders. We know which ones have changed their appetite, who’s interested in a particular sector, who might be competitive on a certain type of facility and, just as importantly, which lenders are unlikely to be interested. That isn’t knowledge we’d expect somebody running the finances of one company to have, in exactly the same way that we wouldn’t expect to know the detail of that company’s cash flow as well as they do.
The best outcome comes when we use both sets of knowledge.
It’s the same with accountants – some of the best finance deals we’ve worked on have involved the client’s accountant from an early stage because they’ve helped us understand the numbers, challenge assumptions and provide the information a lender needs, while we’ve concentrated on finding and negotiating the right funding. It’s a team effort!
A good deal has to work after I’ve left the room
Getting finance approved isn’t the end goal – the facility has to work for the business once it’s in place, and that means the people who are going to manage it need to understand it and be comfortable with it.
Saving £1,000 or £2,000 a month looks great on a spreadsheet, but if there are operational issues, reporting requirements or restrictions that make the facility impractical, we need to know about them. Equally, if the only reason for staying with an expensive or unsuitable arrangement is because it’s familiar and changing it feels like extra work, that’s worth challenging too.
That’s why our advice to business owners looking for finance is simple – bring the people who understand your finances into the conversation early. Let them ask awkward questions and tell us what won’t work. Let them challenge the proposal and give us information we might otherwise have missed. We’d much rather have that discussion before we approach the market than after we’ve spent weeks arranging a facility.
Finding finance is sometimes the easy bit – getting the right finance, with everybody around the table understanding why it’s right for the business, is where the real value lies.
