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BANKABILITY – The Heat Is On! - Uzenzele blog

BANKABILITY – The Heat Is On!

In the work that we do, we often find that businesses aren’t quite yet “bankable”.

 

I like to relate bankability to a recipe. You need the right vision and passion of what you want to cook, but you also need the right ingredients in the right measurements while knowing what temperature and for long it will take to prepare in order for it to become the meal you envisioned.

 

 

 

Each business has its own variation of a recipe, but the basics are the basics.

 

The Ingredients:

  1. Market
    1. Do you have access to the buyers who will buy your product or service?
    2. Do you know what the specific requirements of your buyers are?
    3. Do you have commitment from buyers to buy your product and do you know when they will be taking a buying decision?
  2. Team
    1. Do you have the sales, marketing, operations and financial team to deliver to your buyers at the quality they expect?
    2. Are these inhouse or outsourced? If outsourced, are you managing them appropriately?
    3. Do you have the appropriate individuals (inhouse or outsourced) to provide sound financial and cash management to provide the comfort financiers will need in order to provide you with their finance?
  3. Cash flow
    1. Do you know when your clients will be expecting delivery and when you can expect payment? (Be realistic! We all know that the first time you supply a new client there is a learning curve of their processes)
    2. Do you know what you need to procure, from whom and the actual pricing and payment terms? Do you have credit?
    3. Can you prove and substantiate all the above expected cash flow movements through financial statements, management accounts, cash flow projections, appointment letters, purchase orders and historical trading history?

 

Preparation Time:

  1. Build your market - obtaining the market can take a number of meetings over a few days, weeks, months or years depending on your networks, access to decision makers, barriers to entry and sales cycles of your sector or industry
  2. Building the ingredients into your business is a continuous process and being focused on building them in is key to being finance ready
  3. Putting these ingredients together and being able to submit an application typically takes anywhere from 2 weeks to 3 months, depending on the quality of your ingredients

 

Cooking time:

  1. Actually raising the capital typically takes anywhere from 2 weeks to 6 months (or even longer based on the type of funding, how ready you are and the financiers). Quicker turnaround is possible but rare.

 

Heat:

  1. When you’re in a capital raising project, you need to turn the heat up right to high. You need to rally your team so they’re aware that they’re going to be stretched – tensions are high and deliverables and requests for information come in hot and heavy.
  2. Be ready as the directors and shareholders to put up security in the form of your assets and homes, speak to your spouses and others who have an interest in your financial security – if you’re married in community of property, your spouse’s assets will be on the line too. This is boiling point.
  3. Once you’ve hit boiling point and received and approved a term sheet, you can bring the heat down to a simmer.

 

This analogy, I think, is apt for any business. I have never met a growing business who is not in search for more capital or more appropriate financing terms for their business.

 

U.Intel a division of Uzenzele Holdings, advises family-style growth phase businesses in the process of becoming bankable to ensure the business is finance ready when it needs the finance to meet its customers’ demands.