When is the right time to seek a cash injection? Can an unsecured business loan help with a bad debt, exploit growth or even buy a competitor?
There are many reasons why a cash injection for a business is the right decision for a business owner to take, but sometimes the reason can seem bigger than the solution. Here are some scenarios where getting a cash injection is the right choice to make:
Reason 1 - The Growth Hurdle
If you have been running a business for the first two or three years then you have probably gotten over that initial start-up cash flow hurdle. It means you are now looking to grow or expand.
That means you are a business with a relatively stable customer base with money coming in, comfortable paying for your overheads, more stock and perhaps leaving a bit in the bank for a rainy day, or more likely, the taxman.
It is at this point that you are in growth mode, you'll be wanting to expand, buy more stock, increase your staffing or buy new premises.
Reason 2 - The Opportunity
Your business may be presented with an opportunity that, because of the lack of ready cash within your business it is unable to take up. That could be a huge order for a product on your line that you need a new piece of equipment for, or a large amount of stock.
Now it makes sense to keep your business within financial constraints, but when that goes against the opportunity for growth and generate increased income, it might be time for a cash injection. But you don't want to lose a new customer or have an existing customer go elsewhere?
This is where short term finance, like an unsecured business loan can make sense. Easy to arrange and agree, this short term loan will provide the cash needed to fulfil an order and increase the profit of the business without loading up the debt with crippling interest rates.
Reason 3 - The Buyout
If you run a business with a partner and for some reason that partner leaves or you have the opportunity to buy them out. Then where do you get the money from?
You need a cash injection quick in order to ensure the business continues operation and the exit of the partner doesn't unduly affect the running of the company.
A short term unsecured loan can often be the answer to lending the money required to bridge the gap between buy-out and longer-term financial funding.
Reason 4 - The Bad Debt
From time to time every business suffers a bad debt. It could be a big invoice being contested, product return, an insolvency, or it could be from a slow paying customer that is willing to let you take them to court to recover what is owed to you.
Whatever the reason, it leaves your business in a short-term financial hole; you need that money to pay staff and pay suppliers, neither of whom are particularly sympathetic to your predicament (despite their indelible connection).
An unsecured business loan can be a cost efficient method of securing finance to ensure that the day to day running of your business isn't affected by events out of your immediate control.
Reason 5 - The Technology Upgrade
Is your business in danger of being left behind by technology? Can you afford to still be using that old Lenovo with Windows 8? Does your R&D department need a 3D printer?
Embracing old technology can be the death knell of companies in certain industries, just look at what happened to the textile industry in the 1960s and 70s in the UK.
Perhaps it's time to invest in new machinery on your production floor or in new IT systems to align your business growth and IT strategies.
It can be a costly process but can reap quick rewards in improving efficiency and increasing output - something that can quickly repay your investment.
Reason 6 - The Takeover
Having enough money for a company takeover usually means seeking private equity partners or agreeing long-term loans from the bank. But not all takeovers are for multi-national corporations. Many are for local SMEs that are struggling but have strong customer-bases and an underdeveloped order-book.
Strategic takeovers helps a business expand, grow and consolidate their own market position and can be a key way of securing their economic future. However they can also be costly enough to need a cash injection to help facilitate the purchase.
To learn more about how unsecured business loans or other finance packages can help grow your business request a call back via our contact page.