While I have a habit of collecting articles that I find of interest to the SME Funding function, often very left of field, my habit is equally to set them aside not to be seen again for several months.
I have found a pile of those articles so will endeavour to cull then work through those that are still relevant.
Today it is an advertisement that appeared in the Financial Review in May 2013. It is one of GE Capital’s full page adds (as below) and states “Understanding the complexity. Unlocking the borrowing power.”
Oh how simple a statement and yet for how long have SME business owners wanted and tried to get lenders to do so.
The advertisement’s claim is that by working closely with the business GE Capital was able to get a better valuation (reads “true value”) on its inventory and hence “unlocking $50 million of working capital”. From this the claim is that by doing so GE Capital was “supporting a business model that quadrupled turnover”, noble indeed. Whether that was merely the outcome because this particular lender finally did what the client had been pursuing for years, or if the lender was more instrumental in instigating or nurturing the development of the business model, I don’t know, and perhaps it is somewhat irrelevant because the client achieved the outcome they wanted and GE Capital’s funding was instrumental in doing so.
This is, in my opinion, a terrific advertisement but it ends a little disappointingly by stating “another example of how Asset Based Lending can unlock new capital to facilitate powerful growth”, but there is nothing new or exciting and certainly nothing innovative about asset based lending and that was not what unlocked the new capital or the point of difference in this story. The significant point of difference that made it all happen was that they “took the time to understand” this client’s business.
Ask as we may most lenders or investors will not take “the time to understand” the business. That is a lesson I learnt from my previous business when it grew too quickly and became more and more stretched across all of its resources, including capital, until the chord snapped and many years of work quickly came undone.
If as SME owners we cannot expect funders to take the time to understand our business so that we can access the capital we need, when and as we need it, then we need to be proactive and instead have a conduit between our business and those funders. Someone who works for my business but understands the needs of the funders, someone that does take “the time to understand” both my business and the funders needs and can bring the two together.
It is because of those bitter lessons that I know that SMEs need to have a Business Capital Plan in place that is developed and reviewed as a concerted effort of the business owner, their accountant, lawyer and a professional who understands SME Funding.
Since starting Elcano’s SME Funding Advisory services and conducting research with SMEs and their accountants I have also learnt that Business Capital Planning not only prepares us for getting capital but also changes our thinking so that we can optimise the form and structure of such capital and that actually helps us to accelerate towards our business goals.