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When to seek business funding

By Richard Olsen

External funding plays a vital role in any business, allowing you to overcome challenges, fuel growth and maintain financial stability. Despite this, many SMEs do not understand the significance of finance, with a British Business Bank report finding only 33% used funding in 2020.

Knowing the right time to seek business finance can be the key to achieving your goals. It can also be the difference between survival and failure. If more businesses understand how funding can support their objectives and when, many will become more open to the idea – and experience positive results accordingly.

Below, we have listed five signs that it’s time to seek a financial injection for your business from outside sources.

  1. You have an ambition you want to reach
    Many SME owners will aspire to grow, whether opening up in new locations, scaling operations or expanding their product or service range. These ambitions require significant funding, especially if you need to foot the bill for new equipment, software, staff, premises, research and development and so on.

Few businesses have the capital they need for growth in their reserves. This is why external finance is crucial – helping you progress towards your goals and eliminate the barriers.

  1. You aren’t in a financially strong position
    If your financial accounts are weak or you’re experiencing issues like falling profit or reduced cash flow, it’s typically an indicator that something needs to change. Burying your head in the sand can cause the problem to spiral, culminating in debt and disruption.

Finding the appropriate funding at this stage can bridge a funding gap before it takes hold. However, it’s essential to be honest about your situation so you can find an appropriate solution – rather than entering into further debt.

This can include turnaround finance for failing businesses that need substantial support or short-term cash flow solutions for temporary problems. In any scenario, it can help to improve stability and ensure survival.

  1. You’re surviving, not thriving
    In the busy day-to-day running of a company, it’s easy to focus on keeping things going as they are. Similarly, many owners may assume that they’re doing fine if they have enough money to cover costs and pay staff. However, trouble could be around the corner if you are merely surviving instead of actively refining or expanding your business.

If a business is left to stagnate, you are vulnerable to changing customer behaviour and competition. Eventually, you could be left behind, with no way to recover.

By accessing external funding, you will get a boost that gives you the means to adapt your operations and progress. This will also enable you to improve resilience and remain relevant in a changing world.

  1. You’ve never used external finance before
    Many may assume that only struggling businesses need to access loans or other funding. However, this is inaccurate. If you haven’t used external finance before, it doesn’t necessarily mean you have strong finances – but that you might not be meeting your full potential.

Take time to understand the role of external funding and what it can do for your company. Talking to an independent business advisor can help while gaining valuable guidance for your future.

If there is a place for funding in your journey, it might enable you to unlock results and achieve your ambitions.

  1. The business context has changed
    Industry trends, consumer behaviours and the competitive market change constantly. As the context evolves, businesses must do so to continue to generate demand, provide quality and retain customers.

Adapting your operations, including product development and introducing innovation, requires funding. External finance allows you to achieve this, facilitating the evolution of your company and keeping you relevant in the market.

Seeking external finance is crucial in the long-term journey of a business. By understanding how and when to use it, you can create a careful strategy that enables you to meet your targets without barriers.

UK Business Advisors can discuss the role of funding in your business and help you to identify options that suit your needs.

Richard Olsen | UK Business Advisors (ukba.co.uk)

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