Carl Faulds — December 15, 2016 Follow @CashsolvSuccess in business is partly about inspiration (coming up with an idea for a product or service that excites potential customers) and partly about luck (being in the right place at the right time). However, being able to finance business growth will also have a huge impact on your company’s future.
Getting finance for business growth isn’t always easy
Flushed with success at being able to get an overdraft to cushion them against cash flow problems, many young companies imagine it will be equally easy to get a business loan to power growth. Far from it. That’s because banks like to know where their money is going, whereas with loans for growth the funds are often spent on intangibles like recruitment agency fees to hire new people, marketing costs or staff training.
If you find that banks are reluctant to part with funds, you should consider speaking to alternative lenders. Applying different criteria, alternative lenders are often much more flexible – and as an added bonus, usually have simpler and more streamlined application procedures.
Build borrowing relationships that last
Of course, getting the finance you need to invest in business growth is only the start of the journey. Having a fast-growing business can create its own financial challenges – and ironically it’s precisely during periods of rapid expansion that companies face their biggest cash flow challenges. Why? Simply because you’ll need to invest in raw materials, people and equipment to fulfil new customers’ orders before they pay you.
For this reason, you should build an ongoing relationship with your chosen lender, as there’s every chance you will need their help in the future – and if they won’t assist in getting you over a cash flow hurdle your growing and successful business could have a very bleak future.
Consider innovative business growth solutions
If you have recurring cash flow problems, you should consider invoice factoring and discounting as a business growth solution, which can tame a troublesome cash flow for good. In simple terms, these innovative solutions allow you to borrow the bulk of your invoices (typically up to 85% of their value) the instant you issue them, with repayment being made when your customers pay you.
With factoring, the finance company takes over your debtor ledger and assigns experienced credit control professionals to secure early payment, thus minimising the amount of interest you pay. With invoice discounting, you retain control of your own debtors, which may be an advantage if you would prefer your customers not to deal with a third party over credit control issues. However, if you don’t have the time or resources to pursue your own debts, factoring can be an excellent solution – it saves you the extra work and is likely to result in faster payment.
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