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An entrepreneur’s ability to obtain financing for their business is hard in a normal market and downright challenging in a down market. In the face of rising interest rates and an unstable market, many investors reduce their spending and turn their focus to investment opportunities with little financial risk.
While a tough market does limit the amount of available funding sources, entrepreneurs can acquire the capital their business needs if they are willing to put in the work and think outside the box. Below, 18 Forbes Business Council members offer suggestions on how companies can efficiently find capital in a difficult banking market.
1. Diversity Your Funding Sources
In a tough banking market, diversify your funding sources. Consider business credit cards for immediate funds, apply for grants to get nonrepayable capital and use crowdfunding to validate your business while raising money. Each option caters to different needs and increases your chances of securing essential funding by broadening your financial strategy. - Kameel Gaines, Rig On Wheels Broker & Recruitment Services
2. Look Beyond Traditional Bank Loans
Companies must proactively navigate today's banking climate. Look beyond traditional bank loans and actively seek out alternative finance lenders who specialize in your industry. These lenders offer creative expertise and flexibility, providing a swift and adaptable funding option that is less restrictive than traditional bank loans. This enables quicker access to capital for companies on their own terms. - Marius Silvasan, eCapital
3. Strengthen Your Brand And Reputation
The first priority of every company should be to strengthen their brand and reputation. This involves investing additional financial resources into brand development and promotion. Following this, they can explore various sources of financing that were not previously utilized by the company. With a strategic approach and effective risk management, this strategy can significantly enhance the chances of success. - Jekaterina Beljankova, WALLACE s.r.o
4. Develop A Compelling Pitch
In today's banking world, telling a compelling story is key for companies seeking capital. Tailored pitches linking profitability and trends, along with a visionary narrative, will appeal to investors. Connecting your company narrative with data and market insight will strengthen your investment case. - Michael Shribman, APS Global Partners Inc.
5. Highlight Your Business's Impact
Companies looking for capital can increase their chances of success in today’s difficult financial market by identifying and highlighting the impact and objectives of their business. This should be done in addition to standard requirements of credible historical cash flows and attractive future cash flow projections. This can differentiate their business from other financing targets. - Toyin Sanni, Emerging Africa Group
6. Take A Multi-Pronged Approach
Embrace a multi-pronged approach to enhance your chances of success. Explore alternative financing options beyond traditional banks to consider venture capital, crowdfunding or strategic partnerships. Develop a compelling business plan that showcases your business's growth potential and profitability. Build a strong network, engage with industry experts and leverage digital platforms to increase visibility. - Mike Vietri, AmeriLife
7. Focus on Strengthening Your Relationships
In today's tough banking market, companies should focus on strengthening relationships with existing investors. Additionally, explore alternative funding sources like venture capital or crowdfunding to improve your odds of success. - Tomas Keenan, Step It Up Academy
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8. Build Connections With Your Bankers
I recommend that companies seeking capital build relationships with their bankers. Understanding your finances inside and out is crucial. Present a clear, well-thought-out business plan and financial projections. Transparency and a strong track record can boost your credibility, as trust and reliability are key in banking. If you show that you're a safe bet, you'll increase your chances of securing capital. - Aleesha Webb, Pioneer Bank
9. Highlight Your Status As A Low-Risk Borrower
Banks these days are saddled with high borrowing costs, older low-yielding bonds, empty office spaces, nonperforming assets and various credit risks. Being able to show that you are a low-risk borrower will go a long way toward getting that loan you need. For equity financing, show a high probability plan of achieving growth in these challenging times. - Zain Jaffer, Zain Ventures
10. Prioritize Reaching A Proof Of Concept
In my mind, you should do everything you can to reach a proof of concept without bankrupting yourself or raising a meaningful amount of money. Funding yourself can be a daunting prospect, but if solving the proof of concept means that you need millions of dollars before you even get off the ground, it’s going to be an uphill battle when trying to raise capital. - Howard Makler, Innovation Refunds
11. Understand Finance And Economic Basics
The most essential part is to know the basics of corporate finance and economics. Be able to understand and calculate all the options capital providers have apart from providing capital to your company. Another important part is being able to answer the following questions: "Why should my company be given the capital?", "How do I make capital providers sure in the promised ROCE'' and "What if I'm wrong?" - Oleg Chanchikov, CapyGroup
12. Determine What You Need In A Financial Partner
There is a natural tendency for business owners to run head-on at challenges and opportunities. First, business owners should think about what they need and the profile of their ideal capital partner. Second, research potential investors. Finally, reach out to them in a thoughtful manner, ideally finding common referral points to connect. This strategy takes more time upfront but it leads to better results. - Brett Hickey, Star Mountain Capital
13. Explore Alternative Financing Options
Diversify your funding sources by exploring alternative financing options such as venture capital, crowdfunding or government grants. This reduces reliance on traditional banking and increases your chances of securing capital by appealing to a broader range of investors, enhancing financial stability and growth potential. - Malcolm Allen, Graduate America
14. Lean On Your Network Of Bankers And Partners
Relationships always matter. If you’ve been good to your bankers and capital partners in the good times, you should find the ability to work through and with them in the difficult times. Sometimes, chasing every last basic point is pound-foolish. - Seth Gellis, Community Preservation Partners
15. Identify Funding Partners Who Target Entrepreneurs In Need
Align your search for financial resources and support to those seeking to become long-term partners in growth. There are many entrepreneurs who are often limited in capital and those who embrace the opportunity to be helpful. It is wise to look for funding sources that value people in need of capital and shop them for a fit. - Paul L. Gunn, Jr., KUOG Corporation
16. Engage Investment Firms In Your Industry
If your company can’t obtain capital from traditional lenders, search for investment firms that understand your business and are aligned with your business’s goals and objectives. Developing a partnership with a firm that is aligned will reduce the likelihood of interference. For example, a company in growth mode needs a lender who understands the purpose and use of the capital being raised. - Joseph White, Real Estate and Mortgage Institute of Canada Inc.
17. Articulate What Sets Your Business Apart
Independent of interest rates or cost of funds, Founders need to be able to clearly articulate their competitive differentiation and build credibility instantly by making the right hires. Founders who hire experienced leaders will fare much better in fundraising because no one wants to fund "lessons learned." Young founders definitely need a balance of seasoned executives to cover the gap. - Brian Shore, elevēo
18. Show A Track Record Of Success
The best way to find capital in any environment is to show a proven track record of success. Banks and private investors look for lending opportunities with low risk. Part of being a business owner is taking risks but if you can't show where the risks paid off, lenders will see you as a bigger risk than many are willing to take. If you show lenders your success, they'll be open to lending more. - Chris Clear, Clear Storage Group, LLC
