A lack of funds will limit your business’ performance. That’s why we’ve put together some approaches to help you decide how to source funding for your business.
Why does your business need more cash?
Will more cash solve a problem, give you time to survive a difficult period, or create a growth opportunity?
Before you start seeking extra funds, be really clear on what your business needs and why. First figure out why your business needs the extra money.
Instead of finance, might the following options work for your business?
Release tied-up cash
Can you find the money you need inside your business? For example, could you hold a sale of slow-moving stock, sell equipment and lease it when needed, or resolve unpaid invoices more efficiently?
Establish strategic alliances
Collaborating with other businesses can create a support network while making it easier to engage with the larger community.
Think about promotional opportunities (for example, sports equipment retailers and gyms offering discounts on each other’s products and services) or package deals (for example, hairdressers, beauty therapists, florists and cake shops offering joint packages to people getting married).
Longer credit terms with suppliers
Are your suppliers willing to provide products or materials on credit for a longer period?
If you can come to an agreement with better terms, you may have more opportunities to sell them on and make a profit, potentially improving performance for your suppliers as well as your own business.
Increase market access
Might increasing sales provide the cash you need? If so, consider how you might be able to sell more products or services by changing your operations or refreshing your marketing.
Doing business online effectively means you’re open for business 24/7. Selling to people who’ve already bought from you once is easier than selling to new customers.
Do your target markets know about you and what makes you better than the competition? It could be time to re-evaluate your marketing.
Can you find extra cash within your business, increase your market access or get longer credit terms from your suppliers?
Implications of borrowing
Once you decide to raise capital through external funding, think carefully about how much finance to ask for. Borrowing either too much or not enough can hinder the growth of your business.
Additional loan applications can be problematic if you borrow too little, while borrowing more initially may be the answer if you’re confident your business can make a greater return. Either way, don’t borrow more than your business can afford to repay.
What will the consequences be if you borrow more cash?
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