Firstly, not all businesses do require funding to grow! Some companies do grow year on year
and are successful without the need for external funding, through retaining their profits each
year and re-investing. However, progress is likely to be slow and steady, by raising external
capital companies can really accelerate their growth.
The reality is that funding is an invaluable tool for companies to enable them to grow and
achieve their potential. Without access to working capital businesses can stagnate and risk
falling behind their competitors, causing undue stress and bottlenecks in cashflow.
Many businesses do require debt finance and the reasons for this are:
Sector
Companies that are Cap-Ex ‘heavy’ such as engineering, manufacturing and printing
need large pieces of plant or machinery in order to operate successfully. Paying for
these upfront in cash is not always a luxury businesses can afford. One way of
funding this would be through ‘asset finance’ either through a lease or HP
agreement to spread the payments out over a period of time, ensuring the cashflow
of the business is not adversely affected.
Working capital
If a company needs to pay suppliers quicker than their customers need to pay them,
they will find that cash can become tight very quickly. Receivables finance can be
used to unlock working capital by lenders ‘prepaying’ against unpaid invoices,
releasing cash to ensure payroll and supplier payments can be made on time.
Research and Development
Staying one step ahead of your competitors is key to running a sustainable business.
Will your company be relevant in 5 years’ time if you don’t install new technology,
create new products, improve your online customer experience, open offices in new
geographical locations? Commercial growth loans are available to inject capital into
R&D to ensure you stay on the front foot.
Moving premises or expansion
Businesses looking for a larger footprint may well outgrow their original location and
seek to move. Commercial mortgages are available to support expansion with many
lenders offering up to 70% LTV over a 20/25 year period.
Short-term cashflow difficulties
Every day in a business is different and despite business owners’ best efforts there is
always the risk of an unforeseen event that can cause immediate and short-term
cash needs. Events such as supply chain disruption or a large debtor insolvency can
mean there is a need for an urgent and shorter term ‘bridging’ loan to overcome the
cash strain.
Acquisition
Some businesses will grow organically, others through acquisition. Growth loans can
be used to help support a transaction and help bridge the gap between cash
available at bank and the day one consideration being paid. Sometimes lenders will
offer a loan alongside other asset finance options that are available on
unencumbered assets to assist with the purchase.
Businesses don’t grow overnight. Successful companies grow because they’ve worked
diligently and prepared the business financially to ensure it is structured to achieve its
potential without putting undue strain on cashflow.
Cash is the lifeblood of a company. If we can assist or support you in your growth plans
please get in touch.