- 31 May
Combination Funding To Reduce Funding Risks
I was just reading a venture capital article about product/service diversification in order to reduce business risk and it occurred to me that a similar diversification may be being undertaken to mitigate funding risk. Our research amongst fast growing businesses found that 30% were using some form of "combination funding" (see yesterday's post - How Do Fast Growing Businesses Get Funded) and this could be a valid strategy to diversify the business' funding sources in order to reduce the risk of any one source being removed.
It has long been the case that we have spoken to customers about not keeping all their eggs in one basket i.e. bank lending and invoice finance being provided by the same provider. We have seem plenty of examples of a problem occurring with one funding type leading to restrictions across the board. A sound strategy could be to spread the risk and seek combination rather than single source funding.
Source: High Growth Survey 2013 (100 respondents with 20%+ turnover growth pa).