4 Benefits of Business Finance
- George Dunn
- Aug 1, 2024
- 2 min read
Updated: Aug 12, 2024
When starting a business, you'll need sufficient funds to launch it successfully. As your business grows, financing can fuel further development.
Entrepreneurs can reap various benefits from utilising business funding.
Below, we highlight the key advantages for businesses.
As with any financial product, it's important to seek specialist advice to find the most suitable business finance options for your needs.
Table of Contents
Working Capital
To keep its daily operations running smoothly, a business requires working capital.
This is the money remaining after accounting for the funds flowing in and out of the business.
There may be times when you encounter cash flow issues, such as delayed payments from suppliers or rising business expenses.
In such cases, working capital finance can be beneficial.
Available options include:
Business loans: Short - or medium - term debt funding.
Invoice finance: This includes factoring, where a lender pays up to 90% of your invoice's value, and invoice discounting, where you pay a fee and discount charge for the funding used.
Asset finance: Financing that uses assets on your balance sheet as security against the loan.
Asset refinance: Unlock valuable working capital against assets that your business already owns.
Fuelling business growth
Accessing finance can support business growth.
Entrepreneurs can use it to invest in scaling activities such as:
Product development
Marketing
Hiring new staff
Purchasing equipment
Buying new premises
Acquiring another business
Expanding into a new market
How do businesses finance growth? Discover more in one of our helpful articles
Improving business credit
Similar to individuals with personal finance, a good credit score is valuable for any business.
Banks and investors use it to make lending or investment decisions, and since it's publicly available, customers and suppliers can also check it.
A low credit rating might cause a supplier to decline a contract due to concerns about timely payment, or deter customers from purchasing your products or services due to perceived instability.
A strong credit score allows you to access lower interest rates and better financing terms when securing a loan or other types of finance.
Using finance responsibly can help small and medium-sized business owners build a strong credit profile.
Timely loan repayments and prompt bill settlements improve your score and enhance your chances of accessing additional finance.
A poor score may hinder your ability to obtain the necessary finance to grow your business.
Enhancing financial stability
Businesses must maintain financial stability.
They should be capable of covering all expenses without concern over how to pay the next bill.
Business planning contributes to stable finances, but unforeseen circumstances might necessitate additional funding.
Options like business loans can offer short-term cash flow solutions, and establishing a strong relationship with financial institutions can increase the likelihood of accessing credit facilities when needed.
Timely loan repayments, accurate information, and open communication with your lender can help achieve this stability.
