So you’ve been thinking about growing your business and you’re full of ideas. But then you start to think about financing that growth and the glow of enthusiasm dulls as the questions form in your mind. How much financing do you need? How do you get it? From where?

Financing always seems to come with mountains of paperwork, which doesn’t appeal to many business owners. But there is an easier way, which involves getting Creative CFO to help. We have the team, skills and affordable products to help your business grow, with a straightforward approach that will not overburden you or your company.

A business poised for growth or a strategic shift is faced with the following questions:

  • What to finance?
  • Where to look for funding?
  • What is the company’s optimal debt capacity?

Creative CFO can help you answer these questions.

Adding debt to the balance sheet

Even if a company has cash resources, these are usually needed for the day-to-day running of the business and working capital needs. If cash resources are used to fund a project or to pay for an asset this will place a huge strain on operating cash requirements.

An alternative to depleting your available cash resources is applying for a loan which will introduce new debt to your balance sheet. Adding debt to the balance sheet may be scary, but if it is responsibly taken on, it will not overburden the company. Rather, it will support growth and create a new generation of cash flow. For a completely new project or a new source of revenue, debt funding combined with an equity injection could be the best way to source cash.

What is the invested cash used for?

Not all the cash invested or lent to the business is necessarily used to pay for new assets. It could be to support the initial increase in operating costs, such as new staff members, or to pay rental for increased office space. These are just a few of the daunting decisions that a business owner needs to make. That’s why Creative CFO offers a range of expertise and investment products developed to take a business to the next level. We have the experience and knowledge necessary to shoulder some of the burden as we offer solutions that are tailored to your company’s needs.

Applying for funding

A survey conducted in 2018/19 revealed that access to finance is the biggest barrier to success for an SME. This is because SME’s face several challenges when they apply for new funding. Banks and financial institutions remain cautious of lending to SMEs, largely due to the perception that the risk of recovering the loan will be too high. Historically, the lender has much more negotiating power than the SME. Creative CFO believes in helping SMEs succeed, which is why we strive to make the credit market more accessible and return some of that power to the SME.

We want to partner with our clients to build sustainable businesses with a stable balance sheet, and to maximise the SME’s ability to exploit growth opportunities without exorbitant costs or an onerous borrowing structure. We know that each SME is different and has the potential to tap into unique possibilities. Together we will explore the options available to develop a bespoke balance sheet structure that will maximise your potential and help to build a successful and sustainable business.

Creative CFO’s approach

Creative CFO has a flexible approach to assessing a business and its associated risk profile. Our assessment is not based on the conservative principles applied by first-tier lenders which are better suited to large corporations. We will assess your risk profile on a stand-alone basis, with no preconceptions, coupled with an understanding of the business’s financial and operational structure and performance, the industry that it operates in and the competitive advantages that make it unique.

The Independent Business Review

An example of a product offering that could support effective strategic growth is the Independent Business Review. A business review is an objective assessment of the commercial and financial position of a company to determine its future viability. The review is made available for both internal and external stakeholders. The review includes a stress test of management’s business strategy and plans for real challenges and opportunities. It also evaluates the risk of meeting performance forecasts, and identifies potential upsides that could be exploited.

In performing this review, we focus on market prospects; customer and product profitability; working capital; funding structures; and management processes. After an initial assessment, we would meet with you or the necessary representative team to discuss what you would like to achieve and what your concerns are. Then we do a deep-dive into the business and prepare a succinct report.

How does the business review help?

The report can assist management in addressing the areas of the business that are identified to refine current processes and policies, and introduce cost savings, optimise operating efficiencies and generally streamline and refine the business model to strengthen net cash inflows and the operating performance.

A business review can expose those areas of the business that will benefit from a cash investment, and explicitly indicate how the cash can be applied to introduce new or increased cash flows. One example of this would be to highlight the need for a vacant role to be filled so that vital financial functions are performed that can strengthen the working capital cycle and increase the cash inflows.

An independent business review will also indicate pressure points such as direct costs that impact margins, whether optimal pricing decisions are in place (including whether customers are price sensitive), and what economies of scale would be introduced by certain volumes of product. A trajectory that shows a negative correlation between increased production versus fixed costs will appeal to a funder, and provide reassurance that new cash inflows can support debt repayments. In short, the review will communicate vital data about your business to the lenders.

Applying for funding is a big step for an SME. It can be tricky to convince lenders that your business is the right one to invest in, but this is where a business review and the advice of Creative CFO will stand you in good stead. When you are ready to take the plunge and accelerate the growth of your company, contact your Creative CFO financial manager, or email our Investment Team to find out more.

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