Getting a business off the ground isn’t easy. Keeping it moving in the right direction can be even more difficult. Just as you needed capital to get things started, there will be occasions when you will need to undertake further business funding to power growth – or risk stagnation or even contraction. So what are the key circumstances in which it is prudent to borrow?
1 You’re growing.
It goes without saying that growth will always be something on your mind. However, the time to gain business funding is when you have a specific expansion project in mind. For example, you might need to move to larger premises or open a new branch office, upgrade your existing location, launch a major advertising campaign or diversify into a new area. Whilst all business lending entails some financial risk, taking out funding for these reasons can pay dividends.
2 You’re hiring.
Any business is only as good as its people, and overworked people cannot perform at the peak of their powers. So when you’re taking on new clients and new orders from existing customers, you may need to hire new colleagues or risk standards of service slipping. If you’re lucky, you may be able to recruit them within your existing budget. However, you may well need essential business funding to obtain the skills you need.
3 You’re researching.
Not every company needs to undertake R&D, but every business has to stay relevant and innovative. This is particularly true of SMEs, who will be facing challenges from larger and better-resourced competitors. If you don’t keep bringing new solutions to market, you could soon find yourself being yesterday’s news. Research doesn’t come cheap, but with the right business funding it can be affordable.
4 You’re safeguarding.
Whilst you’re hiring, researching and investing for the future, it’s vital to ensure that you have funding to fall back on if your plans don’t come to fruition. In an ideal world, an SME should have sufficient cash to cover six months of operating expenses, due to the cyclical nature of business and the broader economy. With cash in hand, you can weather a downturn, stock up when offered an unrepeatable deal and invest in growth when the time is right.
5 You’re experiencing a cash flow problem.
Even the most successful and fast-growing business can be sunk by sudden cash flow problems. In fact, it’s precisely growing companies that are most at risk, as taking on new customers can mean investing in raw materials, equipment and people before being paid. However, cash flow crises can also be caused by seasonal slowdowns or wider recessions, and they can strike any business at any time. With the right funding, you can borrow when cash flow problems arise, keeping you in business until the hiatus has passed.
Alternative lenders can help to provide business funding for all these reasons and many more, with a choice of emergency business loans (which can deliver money to your account in under 24 hours), new funding in the form of asset-based finance (allowing you to borrow against the value of your premises, plant and equipment) and invoice factoring and discounting (enabling you to borrow up to 85% of the value of your invoices as soon as you issue them).
As Managing Director of Cashsolv, he offers advice and support to overcome cash flow problems and identify possible underlying problems that can be addressed to ensure a positive future for your business. Carl continues an ethos of working with distressed businesses to help them overcome their financial problems.