- 09 Jul
Why Use Factoring To Fund Business Growth?
One would imagine that the goal of any business he is to achieve growth, although in the current environment of uncertainty over the economic impact of Brexit, it is clear that many businesses are holding back on their ambitions, awaiting greater certainty.
Funding Challenges From Growth And Business Expansion
However, thankfully for the UK economy, there continue to be a good number of businesses that are pursuing a growth strategy, regardless of the uncertainties that are paralysing others.
The challenges that many high growth businesses face, is how to fund that business expansion. For a manufacturer, that could be funding the purchase of raw materials, or staff. For services business it will be more a case of funding people and perhaps equipment, to deliver the services. Inevitably that cost has to be paid in advance of getting paid by your customers.
The issue with turnover growth, or even one-off large orders, is that they often require more funding that the business is geared up for. Companies have a certain amount of working captial facilities that often only match their normal trading volumes. If those volumes rise, this can cause a funding crisis.
Use Of Factoring To Fund Growth
One of the options which can allow businesses to step out of outside of that restricted cycle of funding is invoice factoring. A factoring facility does not work in the same way as a traditional overdraft or bank loan. With those types of traditional lending facilities, funding is at a set level i.e. the amount of the overdraft or the loan. This can work fine for a business that is trading at a particular stable level, however when significant growth is introduced into the equation the amount of funding can suddenly fall short of what is required.
Costs From Expansion
For example if a manufacturer secures a large order, the cost of those raw materials, and additional staff, can put pressure on the working capital of the business. If they are funded through a traditional overdraft model, there may not be sufficient headroom in the overdraft to accommodate those additional costs. Factoring works by accelerating the cycle of working capital passing through the business, funding the costs from expansion. In fact the amount of funding grows as turnover grows - the same is not true of overdrafts and loans.
Liquid Prepayments And Cash Flow
Existing sales invoices are made liquid by prepayments against the unpaid sales invoices, which releases the majority of the value of the sales invoices into the companies cash flow immediately. This means that these monies can be used to finance large orders, or general business growth.
There do not tend to be restrictions placed on what the money raised can be used for, so it can be used for purchasing additional stock or investing in expansion plans for your business. The use of factoring has the ongoing benefit of continuing to lubricate the flow of money through an organisation. You are no longer waiting for customers to pay for products or services that they have received, prior to being able to utilise those monies within your company.
Credit Control Outsourcing To Release Your Time
In addition to the prepayments, the credit control outsourcing service (that forms part of a factoring arrangement) means that you do not need to undertake this yourself, or employ credit control staff. This can create another time-saving which can be important in a business that he is going through a period of rapid growth. Our research has found a clear correlation between achieving high growth levels, and the use of invoice funding facilities such as factoring.
- 01 Mar
Free Guide How To Grow Your Business
There are a lot of business growth related resources on our site, so in this post I have pulled together links to all the help and support that you will find, if you are seeking ideas about how to grow and expand your business.With some 47% of SMEs expecting to grow this year, there is some degree of confidence within the UK, despite all the uncertainties. These resources may give you some...
- 05 Feb
Strategies For Business Growth
Most business owners are interested in strategies for business growth, as they want to increase their sales turnover and to boost their profitablity. Turnover growth doesn't always result in an increase in profits, but with careful control of your costs it is likely to increase your profits.GET MARKETING HELPFor the purpose of this article I have put aside constraints such as having enough...
- 27 Dec
Growth Finance For 2019
2019 is just around that corner, and the run up to the New Year is always a good time to take stock of last year's performance, and make your plans for the next year. Growth is an expectation for almost half of UK SMEs.CHECK THE COST OF GROWTH FINANCEThe Q2 2018 SME Monitor from BDRC showed that 41% of businesses said they had grown over the last year, increasing with size from 39% of those with...
- 13 Aug
Cash Flow Finance
Cash flow finance is a term that can encompass all the invoice finance products and also some business loans. Even an overdraft might fall under that category. Pretty much any finance that is for working capital purposes i.e. not to buy an asset, could be included under this banner.APPLY FOR CASH FLOW FINANCEI thought I would check how easy it is for a company to find cash flow finance quotes...
- 06 Aug
Research Suggests Need For External Business Finance Among Growing Businesses
Interesting to read the London School of Business and Finance, quoting research by Wesleyan Bank, that apparently showed some confident growth prospects, and and appetite for external business finance amongst UK businesses.The research across 500 business owners of SMEs showed that over 50% now have more confidence in the growth prospects for their company than they did last year. In addition,...
- 03 Aug
Base Rate Increases To 0.75 Percent
Yesterday, 2nd August 2018, the Bank of England (BOE) announced its decision to increase bank rate to 0.75%, according to BBC reports. A rise of 0.25%, and only the second rise in the last decade. This marks the highest base interest rate since March 2009. There will be a whole generation in the UK that have never known interest rates to be the heady 5 to 15% levels that some of us remember...
- 08 Apr
UK Finance 2017 Statistics Indicate High Growth Business Users
UK Finance, who recently absorbed the industry body formerly known as the ABFA, have just reported on their year-end statistics for 2017, for the invoice finance and asset based lending market amongst their members.It is important to note that not all invoice finance companies are members of the UK Finance industry body, however the figures do represent a large proportion of the UK market.The...
- 19 Mar
How To Finance A Large Order
The feeling when you win a large order, or contract, can be amazing. However, the euphoria can be short lived as large sales often bring with them a number of potential problems, not least of which may be how to finance a large order.The first issue is that your resources may have to be focused on delivering against that large order. This can take your focus away from dealing with smaller...
- 18 Oct
Using Invoice Finance As Acquisition Finance
Acquisition finance can be required if you are acquiring a business, in order to pay the purchase price.The acquisition may be structured in a number of different ways. The whole of the business may be acquired e.g. by purchasing the shares of an existing company, which effectively means that the buyer acquires all the assets and the liabilities of the target company. Alternatively, the buyer may...
- 16 Oct
Marketing Ideas To Grow Your Business
This post follows on from yesterday's post about Growing The Success Of Your Business, I have noted below a few more marketing ideas to grow your business that you might find helpful. None of them are rocket science - in most cases it's just a case of putting in some effort, but in the right direction. So many businesses use a scatter gun approach to marketing which can waste your resources and...
- 15 Oct
Growing The Success Of Your Business
As a business owner the growing success of your business is likley to be something that you focus a lot of your time on - but you may also be on the look out for new ideas about how to achieve that. Below we have put together a few suggestions that might help you if you are trying to grow your business. They are not meant to be comprehensive but it will hopefully offer a few ideas that you might...
- 04 Oct
Using Invoice Finance To Fund Growth
UK businesses seem to be experiencing some growth and this is likely to create cash flow pressures that can be alleviated by using invoice finance to fund business growth.Recent results from the Bibby Financial Services Global Business Monitor survey showed that 49% of the businesses surveyed had grown their turnover during the last 12 months and 55% were expecting to grow over the next 12...