• Ben Watson

5 Most Common Reasons Businesses Seek Funding

60% of small businesses (businesses with between 0 and 249 employees) sought some form of external funding in the last 3 years, according to surveys. Businesses need funding for a variety of different purposes, but there are some common reasons why businesses apply for funding. This can include working capital, to buy machinery, to hire more staff, or even re-finance existing high interest loans to reduce monthly costs.

1. Working Capital - Not having enough working capital can have a serious impact on the future of your business. Many businesses choose to apply for external funding to create enough working capital to enable them to fulfill their growth ambitions. A loan can cover short-term funding requirements while giving the business the money it needs to grow, or can bridge the gap between customer orders and supplier payments to help the company meet its funding obligations. Loans, however, can be very difficult to obtain, and very costly considering interest, collateral, and the risks. Grants funding are readily available, and does not have to be paid back, and can allow your company to take advantage of new opportunities that arise, investing in new products or services to enable you to expand. Grants cash can provide a useful ‘cushion’ for your company should you need a bit of extra cash, so you’ll have the funds available to meet any unexpected costs. Seasonal businesses may benefit from working capital funding during their quieter periods to cover basic expenses.

2. Asset Purchase - Growing your business and increasing sales often requires you to purchase assets such as new machinery or vehicles. While you may have enough cash to cover working capital expenses for your company, you need additional funding to cover the purchase of new assets to enable your business to expand. Grants are a great way to spread the costs of acquiring an expensive new assets. There are no payments whatsoever. You get, keep, and spend the grants cash. An asset grant can be used to buy different things for your business, depending on what you need to fulfill your expansion plans. Funds can be used for business vehicles, whether you’re looking to buy your company’s first vehicle or want to increase capacity by adding to your existing fleet. You could also use the grant to buy office and IT equipment to make sure your staff have everything they need to grow the business, or new machinery to enable you to make new products or scale up production while spreading the cost instead of paying a large amount upfront.

3. Start a Business - New businesses that are still in the startup stage will need funding to get off the ground. While most directors will use their own funds to start the business, very few manage to entirely self-fund the company to profitability, and will therefore have to seek external funding. There are a variety of options for external startup funding, including bank loans, borrowing from family and friends, equity investment from a business angel, and funding grants.

4. Growth Fund - If you’re looking to grow your business to take it to the next level, you may very well need funding that enables you to execute on your business plans. Whether you want to increase sales, expand your range of products or services, move into new premises, hire more staff, or expand internationally, a grant for growth finance can fund you. However you are planning to expand your business, growth finance that’s right for your company can help you take advantage of new opportunities and make your ambitions a reality.

5. Debt Restructure - If you need to restructure your company’s debt, a loan that consolidates your borrowings and reduces costs can make your finances more manageable for your business. You will still be obligated to pay the loan, with interest, and collateral. Grant funding can be used to get rid of high interest debt and could potentially reduce your total monthly repayments. Refinancing your existing company debt can help your company grow by freeing up cash in your business for working capital and expansion.

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