Expert view: Why due diligence is a two way street

By Paul Spencer, director, Haworths

Haworths logoSeeking funding is an important step for any business. You are entering into a relationship with your funder and you need to be sure that they are right for you.

There are a host of different ways to fund your business and a whole range of reasons you may need to do it.

If you are having problems with your business always seek help initially from a source you can trust.

Accountants have a wealth of knowledge around local banks and funders who can help if businesses are struggling with cash flow, have incurred a bad debt or simply just have customers who pay slowly.

If your business is growing and you want to fund growth or an acquisition, again your accountants should be the first port of call.

Many clients naturally approach their banks but there are funders that specialise in debt funding for growing businesses and these may have more of an appetite than traditional lenders.

Additionally, borrowers need to look at what rates of interest lenders will expect. Usually the greater the lender’s exposure to risk, the higher the interest rate.

Often borrowers may be prepared to pay a higher interest rate than is on offer from banks but be less exposed to security some lenders may ask for.

When looking at offers of funding it is always important to get expert legal advice. Agreements from any lender are complex and binding documents and the devil really is in the detail; much of it in legal terminology which can be a minefield. The rule is: always get someone to help you understand exactly what your position will be in the worse-case scenario.