Is your funding setting you up for growth?

19/02/2016 / by Hilton-Baird

While the difference between growth and stagnation will come down to many factors, the impact of a business’s choice of funding facility cannot be underestimated.

Having the right financial tools in place is fundamental to performance, yet many continue to rely on outdated and often therefore inadequate funding mechanisms to support their plans.

Take business overdrafts as an example. Though it’s true that they provide a financial buffer in the event cash flow becomes stretched, they can be inflexible in structure. Meanwhile, recent figures suggest banks are currently withdrawing them at a rate of £5 million every day.

What must be remembered is that, although the level of funding a business can access is important, what that funding allows you to achieve is arguably even more so.

And as businesses increasingly realign their objectives towards achieving growth, it is this realisation that is leading owners and managing directors to overlook traditional funding solutions in favour of more specialist – and, therefore, supportive – options, which are more suited to today’s challenging and competitive world.

A changing landscape

Although much has been made of the recent surge in ‘alternative’ funding methods such as peer-to-peer lending and crowdfunding, which are enjoying impressive growth, perhaps the greatest proof of the changing commercial finance landscape is provided by the asset based finance sector.

During the third quarter of 2015, a record £20 billion was advanced to UK businesses through the likes of invoice finance and asset based lending, according to the Asset Based Finance Association.

It was a landmark quarter, with advances made against assets reaching the £20 billion mark for the first time in its history. Having grown by 41% in just five years – and accounting for 15% of GDP – it now supplies businesses with twice the amount being lent through overdrafts.

What’s the appeal?

Arguably the greatest advantage of asset based finance to growing businesses is the ongoing cash flow support it provides. By releasing up to 90% of an invoice’s value within 24 hours of its issue, it bridges the cash flow gap between providing goods and services and getting paid, allowing them to continue to invest while they wait for their customers to pay.

What this also means is that the funding that’s released corresponds with the business’s growth. So whether it’s raising five or 50 invoices each month, cash flow will continue to flow.

Particularly for businesses turning over less than £1 million, the optional sales ledger management aspect that invoice finance companies can provide can be just as useful. Not only does it bring credit control expertise, it also removes the resource burden altogether, meaning more time can be dedicated to core tasks and growing the business.

Read more about the different benefits of invoice finance here…

What other options do I have?

Growing businesses will often need access to the latest plant, machinery and equipment in order to meet increasing orders on a timely and efficient basis.

The likes of hire purchase and leasing have therefore been heavily utilised in recent years to avoid the cash flow implications of purchasing new assets outright. According to the Finance & Leasing Association, new business provided by its members reached £110 billion in 2015, marking an annual increase of 9%. This included a 7% rise in specialist plant and machinery finance.

Meanwhile, for businesses wishing to avoid debt finance altogether, equity finance can be equally valuable for those who are focused on growth. In addition to the capital injections that investors will provide, they can also supply expert advice and support to help you run the business, as well as their ‘contact book’ to unlock new growth avenues.

A fresh perspective

Despite economic prospects continuing to fluctuate, there remains a real opportunity for businesses to seize the initiative and concentrate on growth in the coming months. While major investment decisions were deemed to be risky not too long ago, the climate is certainly improving for the most ambitious businesses.

As in all stages of a business’s lifecycle, achieving this growth will only be possible with access to working capital. Yet it could be argued that the UK’s businesses have rarely had as much choice as they do today in terms of how they choose to keep their cash flowing.

This is only true, however, if owners, managing directors and finance directors are prepared to explore the full suite of funding products on the market, understanding that each one has been developed to help businesses achieve their individual goals.

As the commercial finance market continues to shift, asking yourself whether you have the tools in place to achieve your own could be the most important question you ask this year.

Hilton-Baird Financial Solutions is an independent commercial finance broker, with a proven track record of identifying the funding facilities which help businesses achieve their goals. Contact our team on 0800 9774833 or email to discuss your funding options with an expert.


Some of the funders we work with

  • Tradeplus24
  • Praetura Invoice Finance
  • Pulse Cashflow Finance
  • Castlebridge
  • ABN AMRO Commercial Finance
  • MaxCap
  • eCapital Commercial Finance
  • Sonovate
  • Giant
  • Cynergy Business Finance
  • Investec
  • Davenham Asset Finance
  • Davenham Trade Finance
  • Team Factors
  • Time Finance
  • Close Brothers Invoice Finance
  • Woodsford Tradebridge
  • Aldermore Invoice Finance
  • Regency Factors
  • Merchant Money
  • Barclays
  • Kriya
  • Peak Cashflow
  • Partnership Invoice Finance
  • Haydock Finance Ltd
  • Blazehill Capital
  • Royal Bank of Scotland
  • Nationwide Finance
  • Lloyds Bank Commercial Finance
  • Metro Bank SME Finance
  • Accelerated Payments
  • IGF Invoice Finance
  • Berkeley Trade Finance Ltd
  • Ultimate Finance Group
  • Clear Factor
  • 4Syte
  • Optimum Finance
  • Leumi ABL
  • PNC Business Credit
  • Skipton Business Finance
  • Roma Finance
  • Santander Corporate & Commercial
  • InvoCap

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We are a credit broker and not a lender and offer credit facilities from a panel of lenders