When might a business need to raise external funding?


For some business owners and decision makers, opting to raise funding from external sources isn’t easy.

Things might appear to be so much more straightforward if you only spend what you make, or any investment only comes from your own pocket. But there are several moments in a business’s journey that raising external funding isn’t just the sensible option, it will actually help your company to achieve so much more than it otherwise could.

Here are some of the most common times businesses raise external funding.

You’re starting a business

Very few owners have the luxury of setting up their new business with savings. The majority will require some form of external funding to support the venture in its early stages, put the foundations in place and essentially keep cash flowing.

In fact, running out of cash is the biggest reason that start-ups fail. Not necessarily that they don’t have the right level of investment behind them, but because they don’t have access to cash at the time they need to pay bills or make critical purchases.

Overdrafts and start-up loans are commonly used by new starts to provide access to additional funding, while factoring and asset finance can help to keep cash flowing when trading on credit terms and purchasing expensive new equipment.

Read more about how to fund your start-up in our helpful guide.

You’re experiencing restricted or fluctuating cash flow

Cash flow isn’t only a consideration in the early stages of running a business, it’s a vital component of any company no matter how long they’ve been trading or how much they turn over in a year.

Having access to cash is important to ensure you can pay bills as they arise, overcome any unexpected knockbacks (for example, a key customer fails to pay their invoice on time) and be able to make quick investment decisions.

Commonly, however, cash flow will slow down or fluctuate to the extent that it’s hampering how much your business can achieve. In these situations, remember that cash exists – it’s just tied up in various company assets, from unpaid invoices to plant and machinery.

This is where businesses commonly benefit from asset based finance options, which specifically release cash tied up in those assets to reinvest in your business.

Here are some of the ways businesses can improve their cash flow.

You offer credit terms to your clients

Businesses which trade on credit terms are typically putting a lot of pressure on cash flow.

Let’s say you’re a manufacturer that offers 30 day terms to customers. Before you get paid, you need to buy the raw materials to complete the job, produce the goods, deliver them and pay your staff. So when demand in your services and orders increase, that’s a lot of cash that’s getting used before payment is received.

With seasonal businesses or those coping with sudden and unexpected surges in sales, short-term funding like loans and spot factoring can provide a buffer. But invoice finance facilities like factoring and invoice discounting will release up to 90% of an invoice’s value within 24 hours of its issue – with the remainder released once the customer pays, less the facility’s fees – helping with those upfront costs of producing goods or delivering services.

Find out how much you could release with our invoice finance quote.

You are planning major expansion

Large expansion plans can require considerable investment. Whether you need a much bigger office, factory or warehouse, you would like to dramatically increase headcount or you’re looking to buy another business, it can be difficult to do this without raising external finance.

While a commercial mortgage might be the best avenue to buy new property, there may be a few different options to achieve other expansion plans, from one-off investment to releasing additional cash. The most appropriate option might also depend on the size and trading history of your business.

Here are some of the ways we help different businesses to expand.

Your business needs to upgrade or replace equipment

When a crucial piece of machinery breaks down unexpectedly and it’s either not possible or economical to repair, it’s important to move quickly to replace it.

But machinery and equipment can be expensive, and paying for them outright can place unnecessary pressure on cash flow. Even when you’ve been saving for some time to upgrade equipment, unforeseen setbacks can make this difficult.

That’s why businesses commonly explore asset finance solutions such as hire purchase and leasing in these scenarios, which allow them to either borrow a piece of machinery or pay for it in instalments.

Take a look at the pros and cons of hire purchase here.

You need peace of mind

Constantly juggling finances or feeling as though a single late payment could put the business at risk is a difficult and stressful position to be in for any business owner or decision maker.

Particularly in today’s climate, which is riddled with confusion, uncertainty and high profile business insolvencies, every business owner needs the security and confidence to be able to make quick decisions about the future direction of the business.

Having the right level of funding support behind them can really make a big difference, and is what drives many to consider securing external funding.

At Hilton-Baird Financial Solutions, we’ve been identifying and helping businesses to secure the most suitable finance facilities for their requirements since 1997, giving them the tools to achieve their objectives and the peace of mind that their business is in good shape.

To discuss your requirements with one of our funding experts and see how a new finance facility could help to take your business further, please call 0800 9774833 or request a call back.

Hilton-Baird Financial Solutions is an award-winning and independent commercial finance broker that introduces businesses to the most suitable funding solutions for their requirements and objectives. Read some of our recent success stories here.


Some of the funders we work with

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

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