Funding Growing Businesses – Growing Pains

Funding Growing Businesses

Funding growing businesses can be a challenge, Lender cynicisms, doubts over growth plans, the challenges of growing, they can all work against you. Not fair is it?

So how do you arrange funding for a growing business?

Take this analogy.

Why is garden furniture always reduced come October and full priced in April? Put simply, in April everyone wants it, simple supply and demand. When demand slows then the price comes down.

Now look at this a little differently. How easy would it be for a garden centre to raise finance for the purpose of selling garden furniture if they suggested selling it in October? Not too easy. If they did the same thing in April? Probably a lot easier.

So why wait to fund your growing business when it is just about to grow? Do it earlier.

The Rationale

A growing business will have growing pains. Increased performance and success will likely mean a fall in profits, margin and maybe cashflow.

As a business grows it needs to bring in new resources, new personnel, systems, processes etc etc…

In other words, growing pains.

Bear in mind that any lender will want to look at the trend in profits, margins, cashflow etc then you can start to see why funding growing businesses can be more difficult than you might expect.

Adverse movements in profits, margins and cashflow are all warning signs to any lender.

What To Do

Plans for growing a business do not happen one afternoon by accident. They are planned, long thought about and will have been under consideration for some time.

So why is funding always left too late in the day? Think about these tips for funding growing businesses;

  • When you have filed you best set of accounts, look for funding then
  • Funding is easier when things are steady and good
  • You do not have to take the funding you are offered, but it is easier to get agreement to funding, not take it, then go back later and ask for it again. The precedent has already been set and things will be easier

It is all about timing. The age old analogy that ‘a bank provides an umbrella in fine weather and takes it away when it rains’ is fairly true.

We are all about getting you to make the most of fair weather. Bear this in mind and you should not go far wrong.

All growing businesses will have growing pains, so funding growing businesses needs to be carefully considered. But, it can be done. I promise…

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By David Farmer

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