Scotland has an estimated 350,000 SMEs – most of which have or will face challenges with their growth and expansion. While common issues include retaining and attracting talent, managing cash flow and developing products, getting access to finance can typically be the most prevalent impediment to growth.

In this article, Iain Walker from Scottish accountancy firm French Duncan’s corporate advisory team, explains what SMEs can do to ensure they stand the best chance of securing funds to drive forward and expand their business.

There are two traditional financing options available for any SME - equity or debt. Equity requires the owner to make an investment into the underlying company in exchange for a shareholding, whereas debt financing requires no change in ownership structure and will require regular servicing payments to repay the loan.

Both have their advantages and drawbacks, for instance, benefits of equity financing is that the objectives of the shareholders will usually be aligned and the equity providers will generally offer sector expertise. Debt financing’s main advantage is that ownership is not diluted. A third funding route to also consider, which is often overlooked, is grant funding; although this can be dependent on meeting certain criteria, such as job creation, and can be sector specific.

Unsurprisingly, many SMEs experience problems when seeking to raise capital. There are, however, a number of steps that can be taken to improve the likelihood of receiving funding. Some of these include:

While this is not exhaustive, the above steps are guaranteed to put any SME on a better footing when it comes to securing financing.

www.frenchduncan.co.uk