Securing Capital Can Be All About The Story

Telling A Good Cohesive Story Can Make The Difference Between Securing Capital or Coming Up Short

When going through the process of securing capital, don’t underestimate the power of a good story.

Even though any application for business financing is going to focused on the numbers, the actual background story is what ties everything together and can really make or break the deal.

When looking for business financing, the back story has three basic components:  How we got here; exactly where we are right now and why we need more money;  our plan to manage the business on a go forward basis and provide a return on the capital we are seeking.

From a numbers point of view, the story needs to tie past, present, and future together seamlessly.  To often, the write up that accompanies an application is disjointed from past through future, leaving the reader scratching their heads and becoming less enthused with the deal by the minute.

As an example, the future projected financial statements do not reconcile properly with historical results, leaving gaps in the logic that was used to create them.  If there is a logical reason to make radical changes to the future expected results, then significant explanation and support needs to be included.

Moving from the quantitative to the qualitative, one of the key components of any good story is a description of the management team, their individual and collective experience including their track record of previous successes related to helping other organizations meet or exceed their goals and financial expectations.

When it comes to securing capital for acquisitions or start ups, as much as 70% of the overall lender or investor decision making criteria can be based on the strength and abilities of the management team as well as their stated plan for moving the organization forward.

In many cases, deals are pressed for time and the story either gets passed over completely or grossly minimized in order to save time when getting something in the hands of the capital provider to assess.

The feeling can be “just get me in front of the lender or investor, and I’ll tell a brilliant story”.  While a great presentation can have a major impact, there are at least three reasons why something in writing at the start should not be overlooked or simplified.

First, the written story with the initial information package serves as a first impression that actually gives you the opportunity to make a killer presentation.

Second, by providing a well written story that ties everything together,  management is demonstrating their skill and knowledge, further adding to the credibility of the deal.

Third, a presentation that effectively works off of and expands the written story demonstrates that the individuals asking for the money actually were involved in the written plan versus something that was outsourced to a gifted business plan writer who knows how to hit all the hot buttons and strategically embellish certain things to create a more effective marketing piece.

When I worked as a lender, I had a rule that the larger the deal,  the more often I would need to interview the key participants over a period of time.  The key reason why I did this was to make sure the story held together.

In the initial stages of a deal, the higher potential applicants tend to be very well prepared and well polished when delivering their story.  By requiring several impromptu discussions, my goal was to see if the story stayed the same under circumstances where every word was not measured and excessively rehearsed.

Not surprisingly, many cases could not hold water over time.  Their stories developed holes and inconsistencies which ultimately signaled a lack of disclosure and/or a lack of a solid plan.

For those that did hold together, the business financing decision became much easier to make in their favor.

Without a solid story, securing capital can be very challenging indeed.

About the Author Brent Finlay

1 comment
Martin says 7 years ago

Excellent advice. The numbers in business plans and proposals are only numerical representations of the underlying thinking and strategy. If that doesn’t make sense, no amount of number crunching will improve it.

With current software capability in number crunching, this is frequently overlooked. It is much easier to crank out successive sensitivity analyses than it is to think. Someone once wrote that thinking is hard work, and that’s why so few people do it.

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