Smart funding to relieve growing pains

Smart Funding to Relieve Growing Pains

Ah, the sweet agony of growth. You've poured your heart and soul into your business, and now, it's starting to take off. But with that growth comes a unique set of challenges – those pesky "growing pains" that can quickly turn your excitement into stress.

We're talking about the need to invest, and invest big. Stock levels need a boost to meet rising demand. You need to hire more talented individuals to keep up. Perhaps you're upgrading your technology to streamline operations, or investing in new materials and equipment to improve efficiency.

The problem? All these crucial investments require upfront capital. You need to pay for stock, salaries, software, and machinery before the increased revenue starts rolling in. And let's not forget the lag time – new hires require training and time to become fully productive, impacting your bottom line in the short term.

It's a classic cash flow crunch, and it can stifle even the most promising businesses. So, how do you navigate these choppy waters? Smart funding is the answer. Let's explore some options:

1. Unsecured Business Loans:

• Advantages:

  • Relatively quick approval and disbursement.

  • No need to pledge assets as collateral.

  • Ideal for smaller, short-term funding needs.

• Disadvantages:

  • Generally higher interest rates.

  • Lower borrowing limits compared to secured loans.

  • Strong credit history is usually required.

2. Invoice Finance:

• Advantages:

  • Access to funds tied to your outstanding invoices.

  • Improves cash flow by unlocking capital tied up in receivables.

  • Scales with your sales volume.

• Disadvantages:

  • Can be more expensive than traditional loans.

  • Requires good record-keeping of invoices.

  • Customers may be notified of the financing arrangement.

3. Secured Business Loans:

• Advantages:

  • Lower interest rates compared to unsecured loans.

  • Higher borrowing limits.

  • Suitable for larger investments in assets like equipment or property.

• Disadvantages:

  • Requires collateral, which can be risky.

  • Lengthier approval process.

  • If you fail to meet the loan obligations, your collateral is at risk.

The Human Element: Building Your Team

Growth isn't just about financial investment; it's also about investing in your team. As your business expands, you'll need to find the right people to support your vision. The time spent recruiting, interviewing, and onboarding new employees can be significant, especially when you're already stretched thin.

Alternatively, you may need to promote someone into a leadership or supervisory position. This can be a fantastic move, but it often necessitates training and development to ensure they're equipped for their new role.

Finding the right talent, or upskilling your current talent, takes time, and can be a huge drain on your resources.

That's where our friends at Epic People come in. They can do the heavy lifting for you, handling everything from recruitment and onboarding to leadership development and training. By outsourcing these critical HR functions, you can free up valuable time and focus on what you do best – growing your business.

Navigating Growth Together

Growing pains are a natural part of business expansion. But with the right funding strategy and a strong team, you can overcome these challenges and achieve your goals.

Don't let cash flow constraints hold you back. Explore your funding options, build a talented team, and embrace the exciting journey of growth.

Contact us today to discuss your business loan needs and find the smart funding solution that's right for you.

7 habits to make you irresistible to business lenders

Running a business is tough, and the small business owner wears many hats: sales, finance, marketing, HR, operations, client service … it’s exhausting! Sales, operations and client/customer service usually take precedence, because it’s all about making money, right?  But taking a little bit of time every day – it could be as little as 15 minutes – to put your Finance Manager hat on, can make a big difference when it comes to applying for all kinds of business finance. The idea is to be an irresistible prospect for lenders. When your financial house is in order, business lenders see a lower risk and are more likely to offer you those coveted lower interest rates. Plus, adopting good habits can save you and your business time and money in the long run. Here are seven daily or weekly finance-related habits that will not only make you more attractive to banks, lenders and financiers but also keep your business thriving.

1. Sweep GST on invoice payments received to a savings account

Every time you receive a payment, make it a habit to sweep the GST portion into a separate account. This simple step ensures that you're always prepared for GST time, avoiding any last-minute scrambles. Plus, it keeps your main account balance accurate, giving you a clearer picture of your cash flow.

2. Reconcile your bank statements regularly

Don't let bank reconciliations pile up. Make it a daily task, or at the very least, do it once a week. Regular reconciliations help you spot discrepancies early, meaning they are quicker and easier to fix because you don’t need to think back too far to figure out what’s gone wrong. It also ensures that your balance sheet is up to date. Lenders love seeing a business that can whip up accurate financial statements in the blink of an eye.

3. Adjust direct debits to match customer payments

Timing is everything, especially when it comes to cash flow. Adjust your direct debits so they coincide with incoming customer payments. This way, you'll always have the funds available to cover your expenses, avoiding overdraft fees and showing lenders that you manage your cash flow smartly.

4. Pay GST and PAYE when you submit your returns

Don't procrastinate on your taxes. Get into the habit of paying your taxes at the same time you file your tax returns – Inland Revenue gives you the option to do this when you file your GST and PAYE returns. If you’ve followed point 1 above, then this should be a piece of cake. This practice not only keeps you compliant but also avoids the accumulation of debt that can make your business look risky to lenders. And if you do get behind on your taxes, contact IRD to make a payment arrangement, they’re always happy to help (they’re not so bad, after all!). Lenders don’t mind so much when you are behind on your tax payments if you have a payment arrangement in place. They will treat it like any other business borrowing when assessing your loan application.

5. Maintain an emergency fund

Set aside a portion of your earnings into an emergency fund. This fund acts as a financial safety net, helping you weather unexpected expenses or downturns. This shows lenders that you're prepared for the unexpected and capable of managing risks.

6. Monitor your accounts receivable

Keep a close eye on your debtors. Nobody likes to do this, but you need to follow up on overdue invoices promptly. If you can withstand the cost, you could offer incentives for early payments. Effective management of your receivables improves cash flow and demonstrates to lenders that you’re proactive in managing your income streams. (Or if you have an invoice finance facility, your lender will do this for you – cash and accounts receivable help - bonus!).

7. Automate where possible

Leverage technology to automate routine financial tasks. Whether it's invoicing, payroll, or expense tracking, automation saves time and reduces the risk of human error.

Adopting these habits will not only make your business more attractive to lenders but also streamline your financial management, saving you time and money. Don’t we all want to spend less on accounting fees? By showing that you're proactive and responsible with your finances, you'll be in a stronger position to secure favourable business loan terms. Remember, the key to a thriving business is not just in making money but in managing it wisely. So, get started on these habits today, and watch your business flourish!

Then when your need to buy a vehicle or equipment, or business is growing and you need to finance that growth through a secured or unsecured loan, or invoice finance, we can help you get the finance you need … quickly and efficiently if you’ve implemented some of our suggestions!