Running a business is a long game that requires flexibility, adaptability, and money. To keep it running in the right direction and meet your growth trajectories is an ongoing commitment. Just as you’ve gathered the funds to get started or your profit is looking good, there come occasions when extra funding is needed. It goes without saying that access to funding is vital for your business. Particularly funding that can keep up with needs intrinsic to your industry changes, challenges, and requirements. Here are 5 reasons to keep in mind why access to funding is important for your business.
1. Research and development
2. Fast access to funding helps secure cash flow
3. Good liquidity helps SMEs trade through turbulent times
4. Funds on tap allow businesses to respond quickly to growth opportunities
5. Unforeseen costs
1. Research and development
While not every business needs research and development in the early stages, every business needs to stay relevant and innovative. Especially SMEs because they have to keep up with unexpected challenges and competitors with better resources. On the other hand, many business owners still rely on thorough research to get ahead of the competition, often leading to having to finance the process. Ultimately, research and development are necessary for accelerating innovation and sustaining relevance, and it requires funding. A few meaningful ways to start your R&D funding include approaching venture capitalists, seeking government assistance, alternative lenders such as Lula, and using crowdfunding.
2. Fast access to funding helps secure cash flow
The money that moves in and out of your business is important. Any sudden changes can impact your business negatively. Which is why positive cash flow is so important. If it dries up it’s difficult to recover and this inevitably affects all aspects of your business. Anything from seasonal slowdowns or recessions can strike at any time and it’s important to be prepared. With fast access to the right funding, you’ll be able to keep a positive cash flow problems arise. Consider flexible options such as Lulalend’s revolving credit facility which is useful to business owners across all industries. This allows you to keep up with the kind of cash flow challenges that affect your business directly without applying for funding every time.
3. Good liquidity helps SMEs trade through turbulent times
SMEs generally don’t have big cash reserves to fall back on, so when sales drop they need a safety net to meet day-to-day operating costs. Ideally, a business should have anywhere from a month to six months of cash on hand in case of emergencies. Liquidity requires having accessible funds and together with cash flow, it’s crucial to the survival of small businesses. Keeping a close eye on liquidity allows business owners to make smart decisions about their finances and a healthy ratio helps creditors determine your creditworthiness to secure your business the credit it might need.
SMEs need to track the financial health of their businesses and measuring liquidity helps to strike the right balance. You can look to financing companies to secure additional funding when the chips are down. This can afford you the flexibility to get through unprecedented cash flow crunches and buy you time to improve or rebuild your usual ebb and flow.
4. Funds on tap allow businesses to respond quickly to growth opportunities
A new, recovering, or growing business needs money to fund expansion strategies. When a business begins to grow, new locations, products, equipment, more marketing or employees might be required. Consider businesses in the construction industry for instance, where upfront investment may be required to fund projects. These activities add to the existing costs and may need additional funding. At this point, profits may be slim and whatever the stage your business is in, outside financing might be an important driver of success to reach those new levels of growth and business development.
5. Unforeseen costs
There’s no telling when an accident might jeopardise your hard-earned work. From fires to floods, natural disasters, and as recently experienced in South Africa, destructive protests and looting, or even staff injuries. You have to stay prepared. While insurance might cover most events, premiums still need to be paid and money for salaries still needs to be available during repairs. Even for less disastrous accidents such as malfunctioning machinery or outdated machinery, equipment breaking, just needing to be upgraded, or systems being hacked, funding can come in really handy.
Funding allows businesses to plan ahead. In today’s rapidly evolving financial services industry, it’s good to know the options you can rely on. Importantly, it’s good to build good credit and relationships with alternative lenders like Lula that can offer you the flexibility you need to access funding easily and efficiently.
