Many businesses require financing options for a variety of reasons. While stereotypical perceptions of business funding options focus on managing cash flow, there is also a host of growth opportunities for SMEs with these finance solutions.
Recent events have put a strain on many organisations. However, with powerful finance strategies in place, funding could be a step in a positive direction for company growth and market expansion.
What do you need the funding for?Funding is available for a variety of business needs. Common reasons to seek these solutions include:
Working capital: This aspect is one of the most important factors in a company’s financial health. If your business is looking to expand, funding for working capital can bridge the gap to fulfil growth ambitions while meeting immediate financial obligations. In 2019, the British Business Bank Business Funding Survey highlighted this as the most common reason for SMEs to seek finance.
Asset purchase: Updating or expanding your business operations may require investment in new assets. While you may have working capital for the main expenses, funding options for the purchase of an asset can manage cash flow and future growth opportunities.
Invoice and cashflow gaps: The gap between customer orders and payments can make managing cash flow unpredictable. If a company demonstrates a consistent income and good credit history, invoice financing can plug this gap to ensure cash flow is steady.
The current lending landscape is challenging to navigate for all types of businesses. Traditional banks are narrowing their positions in the market. However, there are advantages to alternative funding solutions that could benefit SMEs.
Some key examples of this include:
Innovative funding options: The landscape of business financing is ever-changing, and new deals and products come onto the market regularly. The selection of alternative funding options has unique mechanisms that adapt to SME needs, and provide a wider product choice, whether they need new equipment or help with growth.
Flexible repayments: Unlike typical loans, these funding solutions can be flexible when businesses experience peaks and troughs.
Competitive financing rates: Banks have rigid criteria and rates for lending. However, alternative funding is a very different landscape. The higher levels of competition between funders mean there is scope to get a better deal for your business.
Access short-term cash boosts: Working capital is essential for healthy company finances, but sometimes these may need a boost. Alternative funding options give you access to short-term cash solutions with better rates and transparent costs.
Other advantages of alternative finance options:
There is a range of alternative funding solutions suitable for SMEs. These options provide an opportunity to support growth in your organisation and create short-term solutions where needed. Innovative funding products include:
Invoice Finance
To plug the gap in your cash flow and manage credit control more effectively, invoice finance is an ideal solution. With this unlocked cash from outstanding invoices, you can actively forecast your cash flow and credit facilities while planning for future growth opportunities and working capital allowances. An example of assistance through TSF Finance saw a food wholesaler use the facility to expand after a large contract win.
Asset Finance
It comes as no surprise that assets are a substantial business investment. However, they are also necessary in many cases. Using asset finance services arrangements enables your company to manage flexible repayments without significantly affecting working capital. These options are ideal for substantiating growth plans and increasing turnover in the long term. Recently, we supported a Furniture Manufacturer that required additional assets to help replace older machinery due to an influx in business during the pandemic.
Bridging Loans
Bridging finance is ideal for an injection of cash for projects that are required for short-term needs. This option enables you to maintain cash flow and business operations while the finance bridges the gap to ensure a streamlined process. An engineering business we previously secured funding for was under pressure to raise more finance to take out the existing lender. The sales of the premises was delayed and the business required the finance in two weeks – we completed this ahead of the deadline.
The selection of alternative business funding options is available for pressing needs and long-term projects. Understanding your financial requirements and what options suit your business is key to choosing appropriate funding to suit the circumstances.
When exploring different options, it’s vital to consider the available possibilities thoroughly, including your business’ position. Key areas include:
Establish what the business needs
The main question of ‘what do I need the funding for?’ is a starting point in choosing a suitable product. Establish your business needs and identify what you require to grow and become more financially stable. There are two main reasons for business funding, so ascertain which element suits your situation:
Stability
The economic climate can be unpredictable, and it’s essential to determine your stability when applying for business funding. Projections and analysing market trends will establish the viability of your plans. Also, considering any impact to your organisation if the funding is not received is vital to troubleshoot potential issues.
Suitability
Some finance products are not suited to all company types. Establishing your suitability for the funding option is critical. Plus, aspects such as credit history are significant factors in many lending decisions – we can help you with this challenge. Despite the likelihood of lenders tightening their credit appetite post-CBILs – we can pitch and structure the facility so a lender can approve.
Understanding the full costs
Different finance products have different rates and service costs. Establishing the full costs of a product will ensure your business can pay back the funding without issues. These costs are also essential for forecasting future cash flow and how repayments may affect your working capital in the future.
While the economic landscape is ever-changing, this uncertainty doesn’t have to impact your business growth plans. At TSF Finance, we specialise in supporting SMEs with finance solutions to suit your business needs. With our swift service and honest customer support, we provide access to various funding options that you won’t find in traditional business banks. We’re 100% independent, and there are no hidden costs when arranging finance with us.
Whether you’re a start-up with no credit history looking for suitable funding or are an established business with future growth plans, we can help find the best solution for your needs.
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