Getting funded -The three-legged stool

Many people will be familiar with the three-legged stool philosophy in life - the most common manifestation being in the well known toast 'health wealth and happiness'

The general principle is that of a milking stool. Ideally all 3 legs will be complete and intact.  In reality we will often be on 2 legs with relative comfort - however by the time we are one one leg, things are starting to look a little shaky.

In the commercial lending/borrowing environment, the 3 legs will mostly comprise past performance, future prospects and security available.


Past Performance: Definitely the favourite leg! Lenders will be looking at length of trading, profit performance and trends as primary indicators.

Future prospects: By definition the most esoteric leg on the stool, it is important to differentiate between projections and prospects - and as far as possible to turn the former into the latter (contract, promissory notes, orders etc).

Security available: Occasionally the nature of funding creates its own security - invoices, cars or heavy plant, for example. Failing that security can be added, starting with directors' guarantees and progressing, ultimately to charges over freehold property.

It is fair to say that in today's climate the mainstream banks are looking for all 3 legs to be fully in place.

The role of the secondary market - including brokers like ourselves - is to work with the 2-leggers to build on the strength of the existing legs. 

Sometimes there is a deal to be done on one leg - It needs to be a good one though!

If you want funding & are struggling - or if - like 40% of SMEs - you are nervous to ask, our role as brokers is to help you optimise your legs!