There are many reasons why SMEs seek funding. Some are more common than others. At some point in every business’s lifecycle, they will require funding. This will always be for various reasons and funding can be used in a multitude of ways. Here’s what you need to know about why your SME needs funding.
Funding start-up costs
SMEs that are already up and running often have a hard time getting traditional bank loans. This gives you a pretty good idea of how things are for businesses that are just getting started. This is a shame because many of the biggest costs for new businesses happen before they have even opened their doors. This, of course, includes rental, but it's a lot more than that. Inventory must be stocked, equipment must be bought, and advertising must be rolled out. As any business owner knows, there are always a lot of unexpected costs that come up. Startups often need more money than they think they will, which makes a tough situation even worse.
Most small business owners try to grow quickly in the first few years after they start their business so they can reach the size they had hoped for. This means that most of the time, more money is needed. Even the most successful startups rarely save up enough money to pay for a new location with cash. You can use funding to increase sales, add more products or services, move into a new building, hire more people, or grow your business internationally. No matter how you want to grow your business, funding your growth strategically can help you take advantage of new opportunities and reach the aspirations you hold for your business. If the day-to-day costs of running your business are covered, getting money from outside sources may be required to grow. Many of these loans have fixed monthly payments, which may make it easier to plan your finances as the business grows. But the downside of this is that your business may have a fluctuating revenue stream making the monthly repayments unaffordable during certain periods of the year. Here a Merchant Cash Advance is better as it doesn't have a fixed loan repayment and rather repayments are directly in line with turnover. Meaning that during stronger months you pay more and in leaner months you pay less.
Working capital refers to the cash a business has on hand to pay its short-term debts and day-to-day costs. Sometimes, though, that money isn't easy to get, and that's when a working capital loan comes in handy. Getting a working capital loan to fund your business can help you in a number of ways: From helping you keep track of your money better. Giving you the money you need to grow your business, as well as take advantage of immediate opportunities and make necessary changes.
Funding allows investment
When you have access to funding you can then decide where to invest in your business. The best use of funding is to put it into growth-enhancing projects which will build your business from the inside out. This is far better than using it to plug holes. So for example, a great way to use funding is to upgrade your technology in order to make your systems faster and more reliable for your team to use in your daily work. Innovative technology is just one of the many ways you can use funding to strengthen your operation.
The bottom line
Funding is not necessarily something to use in a worst-case scenario. Rather, it can be seen as a strategic way to keep cash flow healthy and create opportunities for investment in growth-promoting opportunities. As a small business owner, there are many ways you can invest in your business but you need to make sure you have the right channels and relationships on hand to make funding your business simple and easy when opportunities present themselves. So contact Merchant Capital today, and fund your business within the next 48 hours.