Top 10 Tips to Secure Financing to Grow Your Food Company
Photo courtesy of Masienda
There are lots of businesses that almost qualify for financing. They’re growing, their financials are improving, and community banks want to lend to them. But they just aren’t quite there yet. At New Resource Bank, we are more than bankers —we are trusted advisros who are there at every step of your journey to help your organic & natural product company scale and achieve your mission. Scaling is no easy task for any business, and we have helped over 700 businesses that are building a better world.
Here are New Resource Bank’s Top 10 Tips to Finance Your Food Business:
- Your source of capital matters. After the friends and family round of financing, will you raise equity or try to get debt financing? Or both? Either way, make sure the source of funds come from a partner who adds more value than just money – can they provide expertise in your niche, make introductions to distributors or key players? Make sure they believe in your mission and also can provide other ways to increase your businesses’ ability to deliver impact.
- We often find that businesses apply for a loan and their financials are incomplete or incoherent. Think presentation and organization — high quality financial statements are essential for banks to quickly and easily understand your business.
- Create a team of trusted advisors who understand your industry – they will provide valuable insights. Be sure to take advantage of access to their networks, events, and key mission-aligned partners – in the end this network will be invaluable as you finance the growth of your business.
- The landscape of lending is continuing to evolve. There are new fintech lending solutions for companies at all stages. For example: are you pre-profit, have strong receivables and inventory? Through our bank-fintech partnership with P2Binvestor, we offer asset-based loans (ABL) to provide sustainable companies with needed capital at competitive rates.
- The qualifying criteria for a loan are not just all financial metrics. Banks evaluate potential borrowers on the 5 C’s of Credit: Character, Capital, Capacity, Collateral and Conditions. Be ready to answer questions including the strength and skillset of your management team, what’s your competition like, what are other solutions.
- Diversify your revenue stream! What if you lost your biggest client? Diversity demonstrates a desirable product and a resilient business model – both of which are critical for a lender to feel more comfortable to take on risk.
- Don’t try to reinvent the wheel. Learn from models that have worked for other like-minded companies. Gain insight through industry organizations such as OSC2, Naturally Boulder (or the new Naturally Bay Area) that offer educational events, networking, and seminars to share skills and lessons while making valuable connections.
- Review your expenses. Can you renegotiate your lease? Or refi your mortgage? Often this is an overlooked way to save money in the long-term. Also review your payables. How much are your internet bills? Your office supplies? That can be a great way to increase profitability without having to increase sales! This also shows a lender management’s grasp on organizational efficiency and planning.
- Know the risks in your business and know how to mitigate them. When you talk to a lender be sure to demonstrate an understanding of the challenges your business will potentially face and a game plan to overcome them should they arise.
- Take a deep dive into what your business needs in one year and what you will need to scale looking five to 10 years out. Do you know what you need to grow your business, why you need it, and how much it will cost? Is what you are doing ‘defensible’?
Let us help your business scale with purpose! Talk to New Resource Bank today: