Small and medium sized business enterprises seeking to accelerate business growth may need to find funding to bypass the potentially lengthy process of achieving organic growth. They are in a more difficult position than multinational corporations who are more easily able to use mergers and acquisitions in pursuit of increased market share and company expansion.
Smaller or medium enterprises (SMEs) can find acquisitions challenging and costly and are often in a position where integration is not a viable option so the practicalities of a merger make the outcomes less secure from a financial perspective and, therefore, less desirable.
So waiting for or relying on organic growth isn’t a good solution for business growth, but neither is a merger or acquisition. Therefore, SMEs often seek financial solutions such as borrowing to speed up the process, but what are the options and how can you best secure the future for your growing business?
Financing for growth
Often, SMEs have growth potential within their market, with no need to diversify nor desire to merge. They are looking to tap into existing growth opportunities that are prevented by a lack of working capital. Small and medium businesses often face practical barriers to growth such as a lack of manpower, outdated equipment, or restrictive premises but have no freely available cash to pay more staff, buy faster more updated equipment, or move to bigger premises. They know that their future growth would more than cover the cost if the cash was available but lack the funds to make it happen. This is where corporate finance options could save the day.
Options for finance solutions
It is possible for SMEs to access working capital finance, stock or invoice financing, which are popular solutions to gain the funding that can enable the investment that fuels growth. Identifying the most appropriate borrowing routes for your business will enable you to achieve the desired growth in a way that ensures security and affordability. Some finance markets are opening up to SME lending opportunities, but it is still challenging for many to access the level of funding required and mainstream banks tend to favour large corporations with high minimum lending amounts.
For this reason, the market has developed with more niche lenders who recognise the demand for SMEs to more easily access funding. While some remain available only to specific finance types or business sectors, if you can navigate the market effectively, you can find favourable lending terms from those available. Lenders’ enthusiasm is often accompanied by industry knowledge that could benefit your business in other ways, and many are willing to provide insights and encouragement to help borrowers unlock growth.
Businesses are able to borrow working capital to cover day-to-day operating costs, buy stock, employ more staff, or unlock opportunities. They can either borrow against existing stock values or provide alternative collateral, and access corporate finance options other than the more typical invoice financing. Careful research into all of your options will help you to effectively identify and approach the best lenders for your business and your industry. It may not be entirely straightforward but the options exist that can help many SMEs grow successfully.