Throughout my experience in business consulting and financing, I have encountered many people interested in this topic: young entrepreneurs, business owners, managers, and even NGOs. In essence, business financing is always a relevant issue. In my view, there are several important elements to consider when analyzing the right financing solutions for your business:
A key criterion in choosing the right financing solution is the maturity of the business, which refers to the stage at which the business you want to finance is: start-up or a business in a certain stage of maturity (growth, development, exit).
For start-ups, financing solutions might include:
For companies that have surpassed the start-up phase and are in the growth or development stage, the most suitable ways to obtain capital are: European Funds (e.g., POR, POC, PNDR Programs), investment loans from commercial banks, venture capital funds, funding programs (Jeremie), and other financing solutions such as leasing or factoring.
A newer trend for financing companies that have reached a certain development stage is listing on the AERO platform within the Bucharest Stock Exchange. This method is interesting because, in addition to attracting capital, it also enhances the transparency and visibility of the company (Details: AERO).
From my experience of over 10 years in financing consulting, I would say that one of the main issues in identifying, attracting, and implementing financing solutions is the lack of clarity in formulating realistic investment objectives suitable for the business stage. I believe this is where many entrepreneurs who wish to develop investment projects go wrong.
During my consulting period for attracting financing, I was often contacted by people wanting “free funds…”, referring to non-reimbursable financing. Aside from the fact that the term “free money” is entirely incorrect from my perspective, in most cases, these were individuals who did not have clearly defined investment objectives. Money is never free, not even when referring to 100% non-reimbursable financing, as it usually entails a series of long-term commitments and conditions that inherently generate costs, not to mention other potential costs for the beneficiary: currency exchange differences, bank fees, taxes, potential penalties, and other risks during the implementation of the financing, which can materialize and generate indirect costs for the beneficiary.
It is even more important to define objectives that are as clear, simple, and achievable as possible, and, most importantly, appropriate to the business’s maturity level, organizational capacity to implement the targeted investment, and the company’s financial capacity.
Examples of simply defined objectives could be: “entering the market with a new product,” “developing production capacity,” “improving efficiency through re-technologization,” “diversifying services/products,” and the list can continue.
Regarding the timeframe for implementing an investment, I have encountered very varied situations, from 3 months to 4-5 years. It is evident that the targeted financing solution will largely depend on the time objective pursued by the project initiator, i.e., the period within which the entrepreneur wants to see their project implemented and the investment operational (“turnkey”).
For example, for entrepreneurs who want to see their investment implemented within a short period of up to 12 months, I personally have not recommended European funding solutions for the simple reason that statistics and past experiences show that such programs cannot be implemented within a short timeframe (from my experience, I would say that investment projects funded by European programs need allocated timeframes of 2-4 years, depending on the project’s complexity and the funding line’s specifics).
An important stage I have always emphasized in consulting activities is the formulation of the investment budget. It is crucial to build a realistic and rigorous investment budget so that we know the funding required and consequently orient ourselves towards the most suitable financing solutions.
I have advised entrepreneurs with investment projects of €20,000 (funded through AIPPIMM-type programs) as well as important local and regional companies with investment projects with budgets of €3-5 million (funded through structural programs like POSCCE and/or various credit schemes).
In many cases, I recommended a mix of financing solutions or staging the investment or, where possible from a technical, technological, and administrative perspective, breaking down the investment into several modules.
Another important factor to consider in the analysis of financing solutions is related to associated costs (interest rates, fees, taxes, guarantees, etc.).
In recent years, interest rates on loans have dropped significantly, making such solutions increasingly attractive. There are still barriers to entrepreneurs obtaining financing from banks: bureaucracy and the guarantees required for a loan, but I personally believe that notable progress has been made in these areas recently.
Those interested in the topic presented or those planning to start investment projects can contact me via email: contact@florinmpop.ro.