Building and nurturing a successful business requires a good amount of working capital. The funds can come from private assets, investments, or financing from banks or peer-to-peer (P2P) financing platforms. But when is the right time to apply for business financing? There are 3 situations that would call for more working capital:
You want to expand your business
Perhaps it’s been a few years since you built your business. The business is currently well-run and profitable and you have ambitions to expand it to another market. Or perhaps you are an online business looking to establish a brick and mortar shop. Maybe you want to introduce a new product to gain new customers. But to do any of the above, you need a lot of funds to cover the costs. This may be the right moment to apply for business financing.
You need to fix a cash flow crisis
Cash flow is a vital part of any business. But maintaining healthy cash flow is easier said than done; this is especially true for small businesses as they are prone to having cash flow crises. Most often, SME cash flow crises are caused by late invoice payments from customers. The late payments greatly affect a business’ operational activities as the company would not have the necessary cash flow for operations, such as paying employees their wages or covering the costs for product production. This is a point where applying for business financing would be a good idea.
A financing product that may be helpful here is invoice financing. Read more on the benefits of invoice financing here.
You need to build company assets
When you invest in something that grows your business, such as equipment to support the production process, you are building company assets. After all, for a business to succeed, you need to produce more and keep growing your business. Buying productive assets is a good reason to apply for business financing.
If you fall into one of the 3 categories above, you may want to start researching into the financing products available. Also, we have a useful checklist titled “8 Questions to Ask Yourself Before Applying for Business Financing”
Funding Societies provides SME financing products in the form of working capital financing and invoice financing. To learn more, click here.