We asked the experts for tips on how business owners can tell if they’re ready for extra funding – and where they can find it.
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When you build a business from the ground up, it’s a big step to start looking for extra funding. In some cases, you might not even realise you’re ready.
But if your business is ready for funding, or could benefit from a bit of extra cash, it’s likely there’ll be some signs right in front of you. So would you know what they are?
We asked some business experts and funding pros to share their insights on how owners can tell whether their business is ready for extra funding – and where they might be able to find it.
Low cash flow
Low cash flow can make day-to-day operations extra tricky for businesses and, in some cases, can be a clear sign that you’re ready for some extra funding.
So, if your business is performing well but you don’t see the benefits because your funds are tied up in stock, supplies, unpaid invoices or even wages – it might be time to look for funding.
“Maybe your business is seasonal or has been impacted by the pandemic or recent floods,” said Scott Weddle, head of commercial operations at Swoop Funding Australia.
“You could really benefit from a type of funding that will help you replenish cash flow where needed and there are plenty of options designed just for this.”
Weddle’s team helps Australian businesses source funding from a variety of areas including loans, equity, grants and commercial mortgages, and then guides them through the process from start to finish.
“There are a lot of options out there for businesses and sometimes it can be confusing as to which product is going to be the right fit,” he told Finder.
“I have conversations with small businesses every day who ask at what stage they should consider funding. The answer to that varies and depends on their own goals and objectives, but it is important to understand what options are available to you.”
Opportunity to expand
Another common sign your business is ready for extra funding is if you’re ready to expand – maybe with a bigger workforce, increased capacity or a larger footprint.
“Plan for this well in advance to ensure you have the right level of funding in place,” says funding pro Weddle. “This can be for the purchase of additional vehicles, an office or yard expansion, hiring new staff and other costs associated with your expansion plans.”
While businesses should be sure they’re ready to take on the extra risk, Weddle also warned that waiting too long to source funding can have a detrimental impact on businesses.
“It can delay what you already foresaw, as funding with major lenders can take around 6–8 weeks – this can then cause you to take finance at a higher rate to get the funding you need faster,” he explained.
Weddle also said that delayed funding can have an impact on potential profit margins.
“By not planning and preparing for your next stage of funding, you will leave yourself open to not having the capability to complete the project you were aiming to,” he said.
“Being prepared for growth and investment into your business will set you up for undoubted success.”
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Need to innovate
Of course, growth isn’t just about getting bigger. If you’re increasingly focusing on innovation and differentiation, extra funding could help.
“You appreciate the importance of innovation since you may be in a position that is critical to your company’s growth,” said Salvador Ordorica, CEO of The Spanish Group.
“If you’ve reached this point in your expansion plans, it’s time to seek extra capital. It’s wise to invest in your company’s innovation in today’s business environment.”
According to Ordorica, extra funding could help across a range of areas including research and development, technology or the evolution of new products or services.
When it comes to specific types of funding, Ordorica encourages business owners to conduct thorough research and look into all possibilities including alternative financiers, business loans, angel investors, credit lines and crowdfunding.
If things are going well for your business but you’ve hit a plateau, this might be another sign that you need to switch things up or source extra funding.
“You can tell that your business is ready for a new market opportunity and therefore for extra funding because your revenue is starting to flatline,” said 2account virtual CFO Renee Minchin.
To create a new innovation, Minchin suggests looking for new market opportunities – expanding either horizontally by taking your existing product or service into new regions, or vertically by upgrading your product or service to reach a larger target market in your current area.
“For example, in my accounting and bookkeeping business, we added CFO and Director Services to reach a larger target market in Melbourne,” she said.
When it comes to securing funding, Minchin encourages established businesses to go to sophisticated investors or seek a funding loan from a bank, opening up opportunities across finance, credit cards, crowdsourcing and grants.
You have a solid business plan
There are always going to be some uncertainties in your business outlook, but when you have a clear and solid business plan, it’s much easier to identify the need for funding.
“If you do it right, business planning will link the dots in your company so you can see the whole picture,” says Tony Martins, founder of media platform Profitable Venture.
According to Martins, business owners should make sure their whole strategy is present in the business plan, products are appropriate for their intended audience, and fixed costs for the long term, product development and operational expenses are all included in the budget.
“Your plan must reflect all this and more,” he told Finder. “If it does, then seeking funding might be the next step for you.”
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