Ready, Set, Grow: A Guide to Funding Business Growth
Almost every small business struggles through ups and downs on their journey to funding business growth. When you’re battling the day-to-day, it can be easier said than done to identify and embrace opportunities for growth, but there are a few different areas where the right finance could help.
Take on new projects
If you have the opportunity to take on a new contract, it’s exciting news for your business, because new work means more customers, and eventually, increased revenue. Some new projects are a stepping stone for growth, whereas others will be make-or-break for your company. Either way, you might want to use finance to make things a bit more manageable.
Winning new contracts is a good sign for the quality of your service but may seem like a big challenge. Many firms choose to use finance to boost their working capital, and going down this route means you’ll be able to buy new materials or equipment, or even hire more employees.
With many alternative lenders, you’ll get the funds very quickly — in days, if not hours — so you can take advantage of new opportunities safe in the knowledge you’ve got the cash you need to see it through.
New equipment or machinery to boost growth
Updated equipment or machinery can help you work (or produce) more efficiently. There are many types of asset finance that can help you acquire new machinery or equipment — whether you need a new van, a more efficient excavator, or updated computer systems.
Whatever equipment you need, using asset finance is a simple way to kick off growth. Simply put, you can get new assets but still maintain a healthy cash flow, because you can use the assets without having to pay a huge amount of money upfront.
Pursue new markets or expand into new offices
New markets mean new customers and potentially greater traction for your product or service. However, every small business has limited resources, and additional funds may be a useful or even necessary option to realise your international plans.
Many firms use trade finance in this situation, which is designed for paying suppliers. It’s based on purchase orders, so if you’ve taken on a big new customer you may be able to raise finance even if you haven’t been trading long. In fact, one of our recent customers MyGatorWatch did exactly that, with only 6 months of trading history.
The same applies to domestic expansion. If you’re getting lots of new contracts, ordering more stock, and hiring more staff, you’ll naturally think about expanding to another location — but it’s difficult to do so if your working capital isn’t keeping up. An all-purpose business loan could be helpful here, so you know you’ve got some extra cash to cover the short-term costs while your revenues catch up.
Embrace new types of growth funding
When you’re looking at using finance to grow your business, it’s important to keep an open mind. The business finance market has changed drastically in the last decade, and innovative business finance options like crowdfunding and peer-to-peer lending can be a smart way to give yourself some financial tailwind.
There are lots of platforms that allow businesses to get equity investment or a business loan from ‘the crowd’, but it’s important to bear in mind that if you choose to go down this route, your business needs be attractive to potential investors or lenders. For this reason, it’s not suitable for every growing business, but it can be a worthwhile option to explore.
Equally, there are lots of new options for ambitious business owners looking to take over existing firms. Raising finance for mergers, acquisitions, and management buy-ins and buyouts is complex, and can be structured in many ways, but there are lots of lenders in the market who could help. If you’re planning your next move for business growth, it’s a good idea to start thinking about your funding options early.
Running a business is tough work, and there are many challenges you have to get through — from setup to survival, to growth. But, if you prepare your strategy early on, alternative finance can help you approach the next step and move your business forward whether you’re expanding internationally, or getting a second van.
Float allows you to see the reality of the cash flow in and out of your business. By monitoring your cash flow through Float you can be one step ahead when applying for funding – you’ll know if, and when, you’ll need to.
About the Author
Conrad Ford is Chief Executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders”. Funding Options has been selected by HM Treasury to help businesses find finance when they’re unsuccessful with the major banks, as part of the Bank Referral Scheme that launched in November 2016. @FundingOptions