REVEALED: The reasons businesses are seeking external finance


New research has revealed the reasons why small businesses are currently raising external finance and what that funding is helping them to achieve.

According to the latest Federation of Small Businesses (FSB) Small Business Index (SBI) report, managing cash flow was the most common use of external finance in Q4 2019.

Here we explore the results of the report in more detail.

Managing cash flow

The research revealed that four in ten (37%) small businesses that made successful finance applications last quarter used the sums raised to support their cash flow.

Often, when a business trades on credit terms, cash flow can be stretched as suppliers need to be paid ahead of receiving payment from customers.

And, when a business is faced with long credit terms or late payment, this can become even more challenging.

In these instances, borrowing money can be a useful way to ensure enough money is available to meet day-to-day commitments.

Discover five funding options made for improving cash flow here

Updating equipment

Almost one in four (23%) of the small businesses questioned used external finance to update their equipment.

Some businesses replaced dated machinery with newer versions that are more efficient to give their company a competitive edge.

Whilst other businesses purchased additional equipment in order to sufficiently meet increased demand as their company grows.

Buying this equipment outright can take a large sum of funds away from a business and put strain on cash flow.

In contrast, using external finance allows businesses to make large purchases without tying up working capital.

Discover ways to raise finance to buy equipment here

Business expansion

Another common use cited amongst those who raised external finance was to fund business expansion, with 16% borrowing money for this reason.

Whatever the size of your business, scaling up can require significant investment.

Increased demand for your products and services may sound like good news but, if your business doesn’t have the resource to fulfil all the new orders, the impact on your cash flow could be problematic.

In fact, without the right infrastructure in place, taking on too many orders too quickly can be more damaging than not taking any on at all.

That’s why having access to external finance is vital for those businesses looking to expand or grow.

Discover ways to finance business growth here


A small proportion of businesses surveyed (2%) borrowed money for recruitment purposes.

Despite current economic uncertainties, it’s great to see that many small businesses are continuing to grow their teams.

In order to do this successfully, it’s important to have adequate access to working capital to continue to invest in growth and development.

For more reasons why successful businesses borrow money take a look at this blog

Do you need access to external finance?

If you’re in need of a cash flow boost, we can help.

As an award-winning commercial finance broker with more than 20 years’ experience, we can identify the most suitable funding facility to help your business overcome a wide range of cash flow challenges.

Contact our team on 0800 977483 or request a call back to find out more.
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Some of the funders we work with

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

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