The Business and its Trading Position

This chapter gives an introduction to the business and the executives who are making the application for the funding. The aim is to inspire confidence in the potential financiers that the business is financially soundly based and the executives have the appropriate management and entrepreneurial skills. Any project backer has to appraise 3 non-financial aspects of a business:

- the product/invention and its market
- the physical and production resources
- the management of the business

The reader is trying to assess whether this team will be able to transform an unproved product into sales which will exceed costs! Perhaps the only way of assessing the management is to look at their history.

Information given will include a summary of recent trading results, the legal status of the business as a limited company or any other type of standing, an organisation chart, biographies of the executives giving their relevant experience, and the mission statement (or objectives) of the company. If the application of financing is being made on behalf of a start-up business it will not be possible to give evidence of the soundness of its standing. In this case it will be necessary to emphasise the track record of the founding partners and their suitability to take on the risks of the proposed venture.

It will be critical for you to produce a company mission statement!

The mission statement will define the essential character of the company and will set out what the company is aiming to achieve and you will be held to this by your backers!! It will state what business the company is I, not in terms of the technology which it employs, but in terms of the type of clients it supplies.

Most importantly, it will say how the company is uniquely different from any of its competitors. The mission statement will demonstrate how the company satisfies clients’ needs better than any other company.

A statement on the company’s corporate objectives will be required. This will declare aims in terms of growth of turnover and market share. These will be given for both the short term and the long term. Financial appraisal of the business should include the following information:

Net tangible assets: the size of the proprietor’s capital. This value will influence the amount of money which can be borrowed.

Capital gearing: ratio of borrowing to shareholders’ funds. This will indicate the vulnerability of the business to fluctuations in sales.

CHECK LIST
- What is the business name and industry?
- What are backgrounds of the business team and what are their roles?
- What skill gaps exist within the organisation and how will these be filled?
- What are the resources required for the business over time?