How to finance a growing business

finance routes for business owners

Inspired by the achievements of Leicestershire’s Top 200 companies (see page 29), 2XL Commercial Finance director Darren Willoughby tells Niche readers how to secure finance for business growth

First of all, a huge well done is in order to all the companies that appear in Leicestershire’s Top 200 companies, especially against a backdrop of the uncertainty we’ve seen over the last two years. Huge credit also goes to those small and medium sized businesses that have worked diligently to keep our economy afloat over the last year.

The pandemic has also seen a whole host of start-ups born and, as the saying goes: ‘out of adversity comes opportunity’. This couldn’t be more fitting for those about to embark on their business journey.

As a commercial finance brokerage with our head office in Leicestershire, it’s fantastic to play a small part in the growth journey of many local businesses by assisting them in obtaining the right financial solution for their business.

A common preconception is that if a business requires finance they must be in trouble – nothing could be further from the truth. The input of finance can often enable companies to reach their goals or aspirations more quickly. But what does this actually look like?

Working capital

The ability to inject money into a business by way of loan or overdraft can often give the business the boost it needs to perhaps fund stock, equipment, staff or expansion. This money is then used to give the company a return on its investment and this injection could be in the form of an overdraft or business loan.

Commercial mortgage

Many businesses are on the lookout for more space and demand is currently outstripping supply, particularly for warehousing and industrial units. The ability for a business to purchase its own premises in a number of guises gives the business owner security going forwards and, hopefully, a long term asset for the business. Many business owners who already own their premises can also look to remortgage the building on commercial terms to inject more cash into the business and use that money to get a strong return on investment (ROI) within the business.

Asset finance

In some cases, cash is king; hence the ability for business owners to keep cash in the business and actually then finance things such as vehicles, machinery and equipment using asset finance. The beauty being that the security for the loan is the actual assets themselves. Finance can be taken over a longer term, thus reducing huge capital outlay within the business and avoiding the use of vital cash resources that could be apportioned to other things.

Refinance

Many business owners fail to review their financial arrangements and often have no idea if they are actually getting the best deal for their business. This is across all types of financial products. Home owners review their mortgage regularly but the same can’t be said for

all business owners. And, with banks regularly moving goalposts and changing products, businesses could be paying way over the odds for their products when there may well be better available, particularly as more new and alternative funders come to the market.

Invoice discounting and factoring

Invoice discounting and factoring allows you to simply raise money against your current debtor book and also against any outstanding invoices to ensure your business can maintain a healthy cashflow. Varying solutions are available for a range of businesses, with many different types of providers in the marketplace readily available.

Out of adversity comes opportunity

Property portfolio finance

Portfolio funding is when a borrower is looking to purchase additional property, refinance or raise capital against an existing property investment portfolio, and it’s available against commercial, residential, and mixed portfolios. The rates of borrowing and loan to value (LTV) available are determined by the rental income being derived from the portfolio after costs and other deductions. An assessment is made of the borrower’s property portfolio schedule which includes property values, tenant or lease details, and rents received. The options are limitless with interest-only options available too, and each option is tailored to the specific portfolio. Many landlords use this option to make further acquisitions or simply review what they currently have to ensure the deal is competitive. In summary There are countless possibilities for funding business growth, expansion, and development. Whether you’re looking to grow via acquisition or the hiring of new staff, the question of finance will come into play. While at first you may have thought that securing adequate funding to take your business to the desired level was something impossible for you right now, this list may help point out that there are options that may be available to you right now. You can find out more about each option at 2xlcommercial. com or by contacting myself at darren@2xlcommercial.com. 01509 434 052 | 2xlcommercial.com | info@2xlcommercial.com

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