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Calculating the Risks and Rewards of Growth Finance

When a thriving business overachieves and surpasses financial targets, this may be an indicator that it’s time to raise company benchmarks and embrace an ambitious vision for the future of your company.

By challenging the business to aspire to a greater vision and generate higher turnover, you will need to invest in company operations and make internal adjustments to facilitate increased demand. If your business is restricted from an operational and capacity perspective, you may consider seeking additional finance to loosen any limits and enable expansion.

Many forms of finance can be used to inject your business with cash and encourage growth. By taking this step to achieve company milestones, you can explore the full potential of your business and maximise productivity. Growth capital is often used to target areas of the business that can benefit from a cash injection to stimulate growth and break the glass ceiling.

What finance is available to facilitate growth?

As different ingredients can be brewed together to create a remedy to a problem, there are numerous finance options available, fit for different purposes. Beginning with pinpointing the areas that require growth, you can match a finance solution that can help you achieve your aspirations in that area.

Trade and Stock Finance

This form of finance is suitable for businesses with cash flow requirements to enable growth and relieves the first pressure point when financing the purchase of stock to spread the risk.

You can increase the facility as your business grows, allowing you to obtain more stock and achieve higher turnover. If you are in the market to secure larger deals, trade and stock finance can help you eliminate your cash flow worries and allow you to bridge into a more long-term solution. If you’re waiting on approval for a permanent facility, trade and stock finance can be accessed quickly to cover you for the short term.

This form of finance is better suited for highly concentrated ledgers, rather than numerous small ledgers. It is intended to drive you into a positive position by promoting growth, rather than daily cash flow which a company restructuring solution may be better suited for.

Invoice Finance

If company growth is limited due to long waits between invoice payments for services delivered, invoice finance can unlock tied-up funds. This can help release money that can be used to invest in your next project that is in line for completion.

From a risk point of view, the debtor may eventually fail to pay due to insolvency, which is where providing sufficient security comes into play.

Asset Finance

If you require new equipment or machinery to deliver services, asset finance can help you fund the purchase of resources and assets. For example, if you have the appetite to take on high volume orders, however, your machinery only allows for small volume orders to be fulfilled at any one time, new machinery with greater production capacity can help you score high-value contracts. As a result, you can generate more profit, faster and generate enough funds to pay off the loan against the machinery.

Taking into consideration risks, the machinery or asset purchased will be under the ownership/partial ownership of the lender, until the loan is repaid. If you are unable to keep up with payments over the long term, the asset(s) may be repossessed.

Competitive growth capital can stimulate innovation and entrepreneurship as business owners access a host of opportunities, otherwise unavailable to them. By providing them with the launchpad required to reach greater heights, business owners and employees can enhance their skillset, invest in training and level up on business potential.

This blog was contributed to us by David Tattersall, Head of Client Relations at Handpicked Accountants.

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Anthony Byrne
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