A business advisor and mentor can make all the difference in whether an entrepreneur get funding or not.
Darlene Menzies, CEO of Finfind, puts this down to many South African entrepreneurs lacking the necessary financial and entrepreneurship skills and knowledge, both which are critical in getting your business finance ready, whether it’s having a handle on the financials or having the proper documentation on hand.
Menzies has experience helping SME owners access funding, her online platform Finfind links finance seekers with funders.
To get the most out of your mentor or business advisor, Menzies says it’s important that entrepreneurs know the difference between the role of a mentor and a business advisor in the funding process.
The purpose of a mentor is to help you develop as a business leader. Mentors do not do the actual work required to get you ready for funding, nor helps you to submit a funding application. “They provide guidance and act as a sounding board as you (and your business) grow.”
On the other hand, business advisors are the experts, who are paid to provide the service of getting you ready for funding and assists you to prepare a strong funding application. “They can advise you about the different types of funding products that exist, and explain which ones suit your particular funding need,” says Menzies.
Menzies says funders require various documents from business owners who are seeking finance in order to:
– assess whether the business is eligible for funding;
– ensure it can afford the funding it is requesting;
– confirm the business’ statutory compliance.
This is where a business advisor comes in:
Menzies says business advisors (and where necessary, small business accountants) are the experts who help you to compile the documents when applying for business funding if you do not have them.
The documents may include: your latest annual financial statements; up-to-date management accounts; latest VAT statements; three months’ bank statements; cash flow projections; any outstanding debtors; signed customer contracts; and a business plan.
Other supporting documents required to confirm statutory compliance include your ID document as the business owner; marriage certificates of owners where applicable; company registration documents; the business’ lease or mortgage agreement; tax clearance certificate; shareholder agreements; share register; proof of business address; any relevant business licences, accreditations or registrations.
Another area in which guidance is required, is understanding the important role that your personal credit record plays in securing finance, says Menzies “Lenders need to assess their risk when it comes to lending your business money, so they look at your personal credit score to determine if you have a good history of repaying any credit you have been granted.”
Menzies says whilst some businesses may have some of these documents in order, the reality is that few have the complete set ready to submit with a funding application. Expert assistance is needed to compile these and position them to present to funders.
Menzies says you can expect a mentor to offer some perspective and inject some big picture thinking to your funding questions.
“To do this, you need to be on top of your cash flow management – you need to know how much money you currently have in the bank and what money is still expected to come into the business; what business is forecast in the future; what current expenses need to be paid or will need to be provided for in the foreseeable future.
“This will help a mentor understand the urgency of your need, what the future prospects are, and what steps you need to take to ensure that you secure the finance you need.”
The most important question to ask is whether the mentor has extensive experience raising finance for their own business, and if they have assisted other SMMEs to raise finance. It is also important to ascertain the success rate of these applications. Ideally you want to work with an experienced mentor who has helped businesses in similar sectors to yours, doing a similar kind of work, and who have a good success rate in securing finance.
You should also ask if they have good contacts as far as experienced business advisors and small business accountants are concerned. Ask if there are people they know of, and have worked with, who can help you compile the documents you need, and can properly position and package your funding application to ensure you secure the funding.
It is not easy to find experts who are affordable, are accredited and have experience raising the particular funding you need for your business.
It is also important that you confirm that your mentor is willing to provide their time and support as they walk alongside you, at no cost. Mentors do not usually take fees for the guidance they offer.