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Intelligent Cashflow, Managing your money

Why do businesses need funding?

Securing funding can be a daunting prospect for business owners. Many see debt as a last resort, to be taken on only when a company is in dire straights. And with plenty of financial companies looking to take advantage of businesses on the brink, it’s little wonder there are some negative connotations surrounding funding.

However, in the right circumstances, securing funding is not only a positive thing, it can be crucial to the growth and success of your business.

Here are five reasons why it might be time for you to consider taking on finance.

Purchasing new equipment

Investing in new equipment is essential for a growing business. Not only will equipment enable your staff to work more efficiently, it can open up new opportunities for asset leasing and acquiring investment.

For example, the owner of a small catering company takes out an unsecured loan and invests in a new kitchen with state of the art equipment, instantly improving the productivity of her staff. Her catering company only operates in the evenings, so during the day she rents her equipment to another company to raise extra funds. After a healthy year’s trading, she decides to grow her business further and takes out a secured bank loan using her catering equipment as collateral. Now she is able to take on more staff and buy a second catering facility.

Financing a small business purchase is not as difficult as you might think. Even companies without pre-existing assets can acquire an unsecured business loan in order to buy equipment.

Find out more about how you could fund your business’ expansion here.

Hiring staff

Perhaps the most important investment a business owner can make is in their staff. Whether you need an expert salesperson to convert your customers, a marketing manager to put your company on the map, or an admin assistant to free up your time, hiring the right people will play an essential role in the success of your business.

But although staff hire can dramatically improve a company’s future finances, the short term pressure of paying someone’s salary can deter some business owners from taking this important step. Especially if they have concerns around cashflow.

In this instance, finding the right financial product to free up your cashflow will put your mind at ease.

Take for example, a small decorating company. The owner has built up a great reputation in the community and has received more job offers than he can fulfil. He knows he needs to hire staff to keep up with demand, but he’s worried. His clients can take a while to pay, and some months he won’t have enough cash to cover his staff salaries. After doing some research, he decides to start invoice factoring (borrowing money against unpaid invoices). With a reliable flow of cash coming into his account every month, he is able to take on new staff and accept twice the number of jobs, doubling his revenue.

Moving or refurbishing premises

It might seem obvious that customer-facing businesses, such as shops or restaurants, need to invest in their premises. But for office-based enterprises, acquiring the right property can be just as important.

Take for example a recruitment company, which operates from a basement office some distance from the nearest train station. Since its launch, the business has been doing well. Due in part to three staff members, who contribute significantly to the company’s bottom line.

Unfortunately, the business owner has overheard staff grumbling about how shabby the office is and how long it takes them to get to work. She worries that they will move to one of her competitors, whose offices are more conveniently located. She decides to take out a business loan and relocate to a brand new office. Her staff are pleased and their productivity improves. Her clients are impressed when they visit the new office, and they recommend her recruitment services to their friends.

Investing in your business’ premises can ensure staff retention and greatly improve a company’s long term revenue.

Find out more about how you could finance your next office move, here. 

Launching a new product

From development to manufacture, marketing to fulfilment, launching a new product costs money, and there are plenty of risks involved. What if the product doesn’t work? What if no one wants to buy it? What if a competitor launches a similar, more successful alternative?

But as every entrepreneur knows, taking a risk on a new product can lead to substantial pay offs.

For example, an amateur skateboarder has an idea for a new skating product. He’s spoken to several skaters at events and online, and he’s confident there’s a gap in the market for his product. He looks into getting a bank loan, but with no assets or previous credit history, he is refused. He decides to start a crowdfunding page, which he shares with skating communities on social media. Soon, he has enough money to develop a prototype.

He joins a P2P (peer-to-peer) lending platform, where he shares his idea with relevant investors. Several companies recognise his product’s potential and decide to invest. He now has enough money to manufacture his product and bring it to market.

There are plenty of funding opportunities available to entrepreneurs beyond traditional bank loans.

Find out more about the funding options available to you, here. 

Improving your cashflow

Late payments and unforeseen bills can make negative cashflow inevitable, even in a healthy business. New data suggests that one in five small UK businesses are currently in their overdraft. And with late payments costing the economy more than £2bn every year, it’s clear that cashflow is a big issue in today’s business landscape.

Securing the right funding solutions can take the worry out of cashflow management and steer you away from more costly options, such as dipping into your overdraft or using a high-interest credit card.

For example, the owner of a design agency finds it difficult to manage her cashflow. Some months she is inundated with work and has plenty of money to cover costs and invest in new equipment. But other months are quiet, and when she’s hit with bills, she ends up going into her overdraft and incurring hefty charges. She looks into funding options and decides to take out a secured loan. The interest rates on the loan are much lower than her overdraft, and the funds enable her to build a plan that suits her business goals.

Find out more about how intelligent cashflow management can help your business.

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