On the road to finance their company's expansion, almost all small businesses encounter a roller coaster of successes and failures.
On the road to finance their company's expansion, almost all small businesses encounter a roller coaster of successes and failures.
Finding investors willing to back a brand-new company can be a time-consuming and aggravating procedure. The typical Australian company may have to wait up to a year and a half before attaining and receiving their financial targets. This contrasts with the relatively short amount of time it may take for highly sought-after businesses to receive investment (a matter of months). Because of the long wait times and high interest rates, entrepreneurs frequently appeal first to their savings, friends, and family for funding. However, because these sources are typically limited, entrepreneurs finally have no choice but to seek assistance from third parties.
Funding is imperative for a business to get off the ground. It will allow your business to grow and move in the right direction. The process of getting a young business off the ground isn't easy, and keeping it moving in the right direction can be even more difficult.
Regrettably, none of the levels of government in Australia—federal, state, or territory—provide financial assistance to individuals who wish to launch a new company; grants are only available for those who wish to grow, develop, or export their existing operations. When this occurs, new enterprises are compelled to seek assistance from financial institutions or investors from the outside. However, much like it has been extensively reported in the media, the tight circumstances of credit markets in the country are causing a decrease in the amount of funding available for new firms and businesses that are growing. Lenders are not as fast to hand out loans and will seek for cash flow guarantees and collateral, which are criteria that are difficult for start-up companies to bring together and prove they will meet.
Ever wondered how you can get funding to help your growing business? Here are seven business funding options you may not have considered.
If you have the opportunity to take on a new contract, it’s exciting news for your business, because new work means more customers, and eventually, increased revenue. Some new projects are a stepping stone for growth, whereas others will be make-or-break for your company. Either way, you might want to use finance to make things a bit more manageable.
Obtaining new contracts is a positive indicator of your service quality, but it may appear to be a difficult task at first. However, the decision to increase their working capital through financing is one that many businesses make, and if you go this path, you’ll be able to make purchases of new supplies or equipment, as well as increase your workforce.
You may take advantage of new chances with the peace of mind that comes from knowing you have the financial resources necessary to carry them through since many alternative lenders will provide you with the funds very fast – in a matter of days, if not hours.
A more recent version of your gear or equipment can help you operate (or create) more effectively. Many different kinds of asset financing may assist you in purchasing new machinery or equipment, regardless of whether you require a new vehicle, an excavator that is more effective, or updated computer systems.
Utilizing asset finance to purchase whatever machinery or tools your company need is a straightforward strategy to jumpstart its expansion. Because you may use the assets without having to spend a significant amount of money up front, it is possible for you to obtain new assets while still maintaining a strong cash flow in your business.
New markets represent prospective clients for your product or service and the possibility of increased traction overall. However, your small firm, like all others of its size, probably has limited resources therefore looking for additional funding may prove to be either a helpful or even required choice in order to realise your worldwide goals.
In circumstances like these, many businesses turn to trade finance, a form of financing specifically designed for making payments to suppliers. Because it is based on purchase orders, you may be able to acquire capital even if your company hasn’t been trading for very long if you’ve recently gained a significant new client. In point of fact, one of our more recent customers, MyGatorWatch, accomplished just that, despite having a trading history of only six months.
The same holds true for development on the home front. It is natural to consider expanding to another location if you are receiving a large number of new contracts, increasing the amount of stock you order, and increasing the number of employees you hire. However, it can be challenging to accomplish this goal if your working capital is not keeping up with your expansion plans. The use of an all-purpose company loan might be beneficial in this situation, as it would ensure that you have some additional cash on hand to meet the short-term expenditures until your earnings catch up to where they need to be.
It is essential to have an open mind while thinking about expanding your company through the use of financial resources. Crowdfunding and peer-to-peer financing are two examples of creative business finance choices that have been increasingly popular over the past decade. So if you’re looking for a method to give your company a financial boost, it’s a good idea to look into these opportunities.
It is important to keep in mind that if you choose to go this route, your company will need to be appealing to potential investors or lenders in order for you to be successful using one of the many platforms that are available today that make it possible for businesses to receive equity investments or loans from the “crowd.” Because of this, it is not appropriate for every expanding firm, but it is an alternative that might be beneficial to investigate and consider.
Similarly, aspirational business owners searching for current companies to acquire now have many new possibilities at their disposal. The process of raising capital for mergers, acquisitions, management buy-ins and buyouts, and other similar transactions can be complicated and can be arranged in various ways; nevertheless, the market contains many lenders that can provide assistance in this area. Therefore, it is in your best interest to begin early consideration of your finance choices if you are contemplating the next step in the expansion of your organisation.
If your business is eligible, submitting an application for government grants is an excellent approach to get funds with very little chance of experiencing a loss. On the other hand, the application procedure can be time-consuming and confusing.
There are websites that may help make the application process easier, such as Australiangovernmentgrants.org. If you are interested in applying for government grants, you may discover websites online that can aid you in doing so. EWM Accountants can also help you determine whether or not you are eligible for a number of grants and tax offsets by analysing your current financial situation.
The idea that obtaining financing for a small business might be challenging is pervasive in popular culture. To be fair, this is usually the case, especially at the beginning or if you do not have a line of credit against your residence. However, there are techniques to boost your attractiveness to financial institutions such as banks. You really need a sound business strategy, some forecasts regarding your company’s success, and some of your own money to put on the table.
It may be to your advantage to approach the bank with the help of your accountant. If you are able to persuade the bank that you and your accountant have your finger on the pulse of your company, then you will have accomplished a great deal towards achieving your goal.
Debtor financing firms have traditionally been considered of as lenders of last resort; nonetheless, expanding enterprises should not disregard these organisations as potential sources of business funding.
Debtor financing gives you the ability to borrow money against your company’s debtor book, provided that the firm is successful. There are a few difficulties involved with the use of debtor finance; however, they may be overcome when managed effectively, and I have certainly seen business owners who had little or no “bricks and mortar” security use debtor funding to positive effect.
Some organisations that provide debtor financing stipulate that the client must be informed of the agreement before the customer’s outstanding obligations may be addressed by the company providing the debtor financing.
This should be handled with caution and reported as a piece of positive news (for example, “the firm is expanding and requires cash to fuel that expansion,” or “the business has outsourced its debtor management role, so letting the owner to focus on business growth.“).
Because of the inherent risk, debtor financing is typically more expensive than other forms of financing; however, if it is the only source of funding you have access to and if the return on capital your company generates is greater than the cost of the debtor financing, then it is an option that should be considered.
It makes perfect sense to fund your expansion using your customer debt. If you want to support the expansion of your company, you may take out larger loans as it expands. However, this method of fundraising does have certain drawbacks, therefore, it is recommended that you consult with your accountant or a business advisor before moving forwards with this course of action.
Suppose you are able to locate a significant client or a complementary firm that places a high value on your concept. In that case, you may be in a position to negotiate with that party to have them finance the expansion of your company.
Angel investors present your company with a further possibility for acquiring financial backing for its operations. In most places, there are a number of angel investor organisations, and there are also a number of angel investors that do business outside of any business angel network.
It’s possible that venture capital firms might be a good choice for your company if you already have a solid business foundation and are trying to amass a significant quantity of money. However, there are a number of disadvantages associated with receiving money from venture capital firms. These disadvantages are mostly attributable to the substantial amount of funding supplied by venture capital firms and the high-risk nature of the loan itself. In most cases, venture capitalist partners will wish to maintain some level of involvement on the board. Sometimes they will also need more of a share in your firm than fifty percent, which means you might potentially lose managerial control of the business. When it comes down to it, whether or not to pursue venture financing should rely on whether or not doing so would lead to significantly more opportunities. To put it another way, would it be better for you to have fifty percent of something or one hundred percent of nothing?
Managing a company is difficult labour, and numerous obstacles must be overcome on the path to success at every stage, from establishment to continued existence to expansion. However, if you start planning your strategy early on, alternative financing may be able to assist you in approaching the next step and moving your company ahead. This is true regardless of whether you are looking to develop your firm domestically or abroad.
You will be able to get an accurate picture of the cash flow into and out of your company by using float. In addition, you can get a head start on the application process for funding by keeping track of your cash flow using Float. This will allow you to know if and when you will need to apply for funding.
About the Author
Funding Options has lately been referred to as “the matching platform for small businesses and lenders” by the Telegraph. Conrad Ford is the Chief Executive Officer of Funding Options. As part of the Bank Referral Scheme, which began operations in November 2016, HM Treasury has designated Funding Options as the organisation that would assist companies in locating financing when they have been unable to secure it from the main banks.
Guest post by : ewmaccountantsadmin Form - Float
Like this? Share it...
