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When do businesses benefit most from external funding?

04/09/2023

There are numerous occasions throughout a business’s lifecycle when raising external funding can bring huge benefits.

From getting off the ground to enabling expansion, the right funding facility can make a real difference to the success, performance and efficiency of any business. It can also open the doors to new opportunities, and of course help businesses to navigate more challenging periods in their evolution.

In this article, we explore some of the most common times businesses benefit from raising external funding, and cover which facilities could be the most suitable.

Fulfilling orders

For companies which sell to customers on credit terms, high order volumes can lead to significant cash flow issues as a result of orders being fulfilled and suppliers paid in advance of customers paying you. This is known as ‘overtrading’, where businesses take on more work than their cash flow allows.

Many businesses therefore use external funding facilities to keep cash flowing and enable them to keep up with demand. Invoice finance facilities are often the most beneficial here, which advance cash against the value of confirmed orders within 24 hours of the invoice being raised, bridging the cash flow gap that arises.

Best suited funding facilities:

Invoice finance
Asset based lending
Trade finance

Buying plant and machinery

Whether you need to upgrade old kit or you wish to invest in newer, more efficient models, the cost of doing so can be prohibitive.

Certain funding facilities make new plant, machinery and equipment more affordable by allowing the business to spread payments over a long period. It’s also possible to lease equipment, particularly if it’s only going to be required for a short period or particular order.

Best suited funding facilities:

Hire purchase
Leasing
Business loans

Improve cash flow

Limited cash flow is not only the number one reason for business failure, it can also be one of the most restrictive and therefore frustrating elements of running a business.

Prioritising cash flow is always therefore advisable, and often it takes a supportive funding facility to enable businesses to do this. So a range of facilities exist for this very purpose, enabling businesses to pay suppliers, salaries, tax bills and other day-to-day commitments on time, whilst minimising administrative workload.

Best suited funding facilities:

Invoice finance
Asset based lending
Trade finance

Enabling expansion

Whether recruiting more staff to keep up with growth, buying new or larger premises or you’re looking to diversify into new markets, expansion can be expensive, and not every business has the cash available to be able to expand without compromising their financial security.

A number of funding facilities can therefore provide targeted support to help businesses do just that. From facilities which provide ongoing access to cash, to those which supply a large cash injection, there are different options depending on your business’s circumstances and objectives.

Best suited funding facilities:

Asset based lending
Business loans
Equity finance

Starting a business

For many people, setting up and running their own business is a dream or life goal. But a lack of capital is often the reason many delay or decide against it, whereas running out of cash is a common reason for new-starts failing to survive longer than a few months or years.

However, there are a range of funding facilities which can help start-ups in different ways – from supplying a cash injection to keeping cash flowing. For any start-up it’s important to understand the finance options available.

Best suited funding facilities:

Business loans
Equity finance
Factoring
Crowdfunding

Buying a business

Acquiring new businesses can be a great way for companies to expand and capitalise on new opportunities. Yet raising finance to buy a business can be a challenging and complex task. Due to the sums of money required, it is rare for businesses to be able to rely on their existing cash flow to fund the acquisition.

By identifying the most suitable funding facility, you can not only raise the capital required for the transaction, but it will also keep cash free to run the business. Certain finance methods may even provide access to additional support and expertise.

Best suited funding facilities:

Asset based lending
Business loans
Equity finance

Buying commercial property

Whether a new office, factory or warehouse, buying commercial premises is one of the most expensive purchases a business will ever make. So it’s no surprise it’s also one of the most common times businesses seek external funding.

While commercial mortgages are commonly used, raising enough cash for the deposit can be a challenge, however a number of funding facilities can help businesses to generate the funds they require.

Best suited funding facilities:

Commercial mortgages
Asset based lending
Business loans

Upgrades

From time to time, every business will need to upgrade certain elements of the technology or infrastructure. From CRMs to IT systems, there is a variety of software and tools available to help businesses be more productive and efficient – but they often come at a cost.

Raising external finance can generate the funding that’s required to commit to such upgrades, keeping cash free to invest in the day to day. The cost of the finance facility may even be offset by the long-term benefits those upgrades bring!

Best suited funding facilities:

Business loans
Invoice finance
Asset based lending
Asset finance

Overcoming financial difficulty

Securing the most suitable funding facilities can be fundamental to a business being able to trade its way out of a difficult situation.

Whether your business is struggling with debt or poor cash flow, different funding options can help in different ways. While some can provide a funding injection, others will release cash against the value of existing assets to boost cash flow. Refinancing existing facilities can also help in this regard, whether to reduce the cost of facilities, spread repayments over a longer term or to consolidate facilities into one affordable regular payment.

Best suited funding facilities:

Business loans
Invoice finance
Asset based lending
Equity finance
Sale and leaseback

How Hilton-Baird can help

If your business can relate to any of the situations listed above and would like to explore the benefits of raising external funding, our team would be pleased to assist.

An award-winning and independent commercial finance broker, we have over 25 years’ experience of introducing businesses to the most suitable funding facilities and partners according to their specific requirements. View some of success stories here.

To discuss your requirements with our team, please call 0800 9774833 or request a call back at a convenient time.

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Some of the funders we work with

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

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