Due to your hard work, diligence, passion, and proficiencies, you’ve just been awarded several contract opportunities that will undoubtedly grow your business and your visibility in the federal marketplace. You are poised to make strides in your industry and engage in higher value opportunities ahead. All of this is exciting and just what your efforts have been directed toward accomplishing…but now you’re facing hurdles that you had no idea were waiting for you.
Can You Fund It?
What are we talking about? It’s a key question: “If you win it, can you fund it?”
After that question comes several others: where do you go for the funding? What will be required of you to qualify for the funding? How do you fulfill those requirements? And on and on…
This is a real and imminent issue for many—if not all—growing businesses in the federal marketplace. The common misconception is that contract awards + profit + more awards = the ability to access funding quickly and easily. The nightmare of that reality is that what you don’t know will set you back, and getting the answers or cash infusions you need will require you to have done some leg work that you may not be aware of. Also, who you’re working with already may not be able to lend to you…and this should have been understood before this need presented itself.
Keep reading for tips to help you gain access to the cash you need so you can keep bidding and winning with no limit in sight.
Items to Consider Before You Need Funding
Liens on Your Company
Many applicants are unaware or forget about existing liens against their company. These liens can encompass all assets or specific ones, depending on the filing reason and organization behind it. It’s crucial for applicants to routinely perform lien searches on their business so they can comprehend each lien’s holder, purpose, and targeted assets. This knowledge can significantly expedite the application process, as larger financial institutions often forget to remove expired liens after balances are paid off.
You may also be surprised to find some liens connected with things like equipment leases and product financing. It’s vital to advocate for yourself to have these obsolete liens eliminated. There may also be anonymous liens, which mean you have to contact the Secretary of State for the filer’s information. If you take this step before applying for financing, it can save you significant time.
Loans to/from Your Company
Applicants frequently lend or borrow money from their company, which is a practice that’s perfectly acceptable. However, it’s best practice to document these transactions with a promissory note and payback schedule between you and the business. Many lenders will request this documentation and may seek subordination. Having this documented in advance streamlines the application process.
To initiate the application process smoothly, you should have your essential corporate documents ready. That includes:
- Tax returns
- Photo IDs for all owners
- Articles of incorporation
- Operating/shareholder agreement
- State-issued good standing certificate
- Any current credit or loan agreements
Having these documents on hand is key to saving time during the initial stages of the application.
Annual Pro Forma P&L
Often referred to as a budget, projected P&L, or just “Pro Forma,” this forward-looking financial statement is not only valuable to potential lenders but also to business owners. It typically consists of an income statement format projecting revenue, expenses, and net income on a monthly basis for the current and upcoming year. In some cases, this can be very high-level and completed in a program like Excel. The lender will tell you if they require something more complex. Assumptions and estimates are essential, and it’s wise to be conservative. Having this statement readily available eliminates the need to create it during the application process.
Understanding Your Cashflow Needs
Identifying your exact cashflow challenge is crucial for potential lenders to match you with the right financing product. For example, lenders may offer very different solutions if your business is lacking enough money to make payroll or if you need funds for a business acquisition or to meet production needs. Educated applicants who know the types of financing available for small businesses and their specific requirements will experience a smoother, less cumbersome application process overall. Most importantly, this step can save you days or weeks of work applying for a financial product that doesn’t solve your specific problem.
While these tips don’t include finding the right resource and provider that will meet your needs, they do provide a road map to help you prepare. It’s important to understand everything above and to have your documents organized. This will help you get what you need, the right amount of it, with proof it’s true, and in time. That way, you won’t miss your deadlines. We encourage you to have a reputable CPA or bookkeeper help you prepare and keep ongoing documentation for the reports we mentioned above. Advocating on your own behalf can also ensure what you need is readily available, which will help streamline the process.
Are you unsure about what you can obtain or what options are available to you at this stage of your business growth? Our team of experts is here to help! We can connect you with valuable knowledge and partners to boost your growth and help you reach the success you’ve been striving for. Let’s work together to ensure your business reaches the success you’ve worked so hard to achieve.