Seeking capital isn’t an easy process, but it can be smoother when you have the right people on your team. Let’s look at how having a Fractional CFO can help you throughout the process of securing capital.

Before You Start

There are two main reasons businesses need capital: for growth and opportunity or to fix a problem, like owing the IRS or vendors. Obviously, lenders are much more eager to provide funding in the first scenario. They’d prefer to help you grow your firm and become a bigger customer to the bank. 

If you do need distressed lending, though, a Fractional CFO can help you get back on track and make your company as attractive as possible for the situation you’re in. The earlier you seek help, the more they can do to help you. Here in Kansas City, the right Fractional CFO will also be well-connected in the area and have relationships that could open up more possibilities. 

A Fractional CFO can also help you through other crucial prep work as you start to look.

Decide what you need to ask

If you’ve never raised capital before, you might not know what to ask providers about. Fractional CFOs have done this many times and can lead you through the ins and outs, with questions like:

• What’s their capacity?

Make sure they can meet your long-term needs. Can they lend you a million dollars — or five? Do they have the resources to grow along with your business?

• What are the proposed covenants?

Everyone’s top concern is always the interest rate, but CEOs often overlook the covenants — the rules your capital provider requires you to play by. This can include things like maintaining a certain debt-to-income ratio, getting approval for purchases over a particular amount, or even putting a cap on how much you can pay yourself as owner. Business owners often don’t understand these rules and how to determine if they’re too restrictive.

• Do they have what you need?

Of course a bank is looking carefully at all the details of your business, but you should be examining their strengths and weaknesses too. For instance, if you have an Employee Stock Ownership Plan (ESOP), some lenders are going to be better than others at navigating that. ESOPs are highly governed and you need a bank that has the right capabilities and experience to work with you on yours.

Tell the right story

For companies seeking capital for growth, a great story moves investors to open their wallets. They want to know about your niche, how you got started, your trajectory, and the people on your team.

Even if your company is in a distressed situation, knowing how you got there, what you learned from it, and how you’re moving forward is important to them. A Fractional CFO will help you prepare a compelling story.

Ask for the right amount of money 

A Fractional CFO can also help you seek the amount of capital your goals require. Companies often miscalculate how much money they’ll really need. Asking for a smaller amount than you’ll need and then going back to ask for more doesn’t look good.

On the other hand, if you go for too much, you could end up giving up a bigger piece of the company than you needed to. A Fractional CFO will model out various scenarios and help determine the right amount of funding to secure.

During the raise process

While the process is underway, a Fractional CFO is an important part of the conversations you’ll have. They can explain to you what the bank or investor is thinking and what everything they’re asking about means. They’re a valuable go-between, helping smooth out communications between you and the provider. 

A Fractional CFO can help you negotiate the covenants to make sure they’re not going to create issues down the road. They’ll talk to the provider about why a covenant won’t work or might restrict the company’s growth. Ultimately, making sure the covenants fit the situation is a win-win for both sides.

As the process wraps up, they’ll also help you screen the offers and make recommendations on which is the best fit.

After you’ve made a deal

Your Fractional CFO will make sure that all the plans and requirements are being handled correctly and that you maintain a friendly relationship with the bank. They’ll also make sure you’re sticking to the covenants the lender requires so you stay compliant.

Working with a Kansas City-based Fractional CFO is the right move

As you can see from our list, Fractional CFOs can help through the whole process of seeking capital, but they can make the biggest impact in the beginning. But this isn’t a one-time service for raising capital. It’s an ongoing relationship that ensures you’re ready for any financial challenge.

Here in Kansas City, working with a Fractional CFO from Crown CFO is a big benefit. Capital providers know us and are comfortable with our team. In fact, a lot of banks want us involved because they know it will be a smoother process for them. 

Our Fractional CFOs have been financial leaders for years and have deep, diverse experience in a wide array of capital structures. They’ve seen the good, the bad, and the ugly and know how to navigate it all. 

If you’re in Kansas City, one of the experienced financial leaders at Crown CFO is ready to help your company get the capital you need to grow — and tackle all your other financial challenges along the way. Contact Kerry George at kerry@crowncfo.com to bring a trusted, expert Fractional CFO to your business.