How corporate governance can help you get funding

Last updated: 8 November 2017

If you're looking for funding you'll need to make sure your business is well run. This means it should follow set rules, processes and practices. These are known as 'corporate governance'.

Corporate governance is often considered something only larger companies need to think about. But it's important for all businesses – especially if they're looking to raise funding.

What corporate governance is

All corporate governance strategies will be different. This is because each business will need different rules, processes and practices.

You'll need to tailor your corporate governance to meet your business's circumstances. Or to meet the requirements of your stakeholders.

But there are things which all good corporate governance will normally involve. This includes:

  • consistent, transparent decision making, risk management and reporting
  • clear communication throughout the business
  • incentives, such as salaries and bonuses, which meet your stakeholders' interests
  • a commitment from senior management to deliver the business's key values – for example, equality monitoring or health and safety
  • a board of directors with a mix of operational and sector skills

How corporate governance can help you

Using corporate governance can help your business, as it:

  • encourages better communication, which can improve the decision-making process
  • creates internal controls to protect your business from fraud and reduce risk
  • measures your business's performance and makes staff accountable
  • gives owners, managers and staff a clear idea of their roles and responsibilities

Getting funding

Corporate governance can also help you to raise funding. This is because funders will expect your business to be transparent and responsible. This includes:

  • clear management structures
  • reporting to and communicating with stakeholders and shareholders
  • formal compensation policies
  • clear policies, procedures and controls which are known to staff and run effectively

Having a board of directors

If possible you should appoint a board of directors. This board will oversee your business's corporate governance.

How you choose to do this depends on the size of your business.

It's possible to have a board of directors made up of one director and a permanent secretary. They can even be the same person.

If you're looking to raise funding, you should make sure your board has a diverse range of skills, knowledge and experience. This will include knowledge of your business's operations and business sector.

This gives potential funders confidence that your business has the skills and experience to make money.

Non-executive directors

If you're successful in getting funding from an investor, it's possible they'll want to appoint a representative to your board. This is known as a 'non-executive director'.

A non-executive director will monitor your business's performance from the investor's perspective. It's also possible they could offer you skills and knowledge that can help your business grow.

You should discuss this with your investor and agree the role and responsibilities this representative will take on.

Further help

You can find more information about corporate governance on the Financial Reporting Council website. This includes information on the UK corporate governance code.