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5 questions every business should ask before seeking finance

In an economic environment of change and uncertainty, businesses are increasingly exploring financial support as a means to navigate challenges and seize opportunities. 

The current landscape, influenced by factors like technology, market volatility, and evolving consumer behaviours, means that businesses are required to stay agile and where possible, financially secure. Whether it’s adapting to digital transformation, managing cash flow in fluctuating markets, or capitalising on emerging possibilities, the right financial support can be a game-changer. 

This decision, while exciting, is not one to be taken lightly. To help you understand whether it’s the right time for you to be considering finance options, we’ve compiled five questions that every business should ask before submitting any applications, ensuring that your decision aligns with both your immediate needs and long-term strategic goals.

1. What is your current financial health?

Before seeking external funding, it’s vital that you understand your business’s financial health. This involves way more than just looking at your current bank balance. It’s about analysing cash flow trends over time, understanding your debt-to-income ratio, and forecasting future revenues with as much precision as possible. This deep dive into your accounts will help you to understand your immediate needs and how additional financing will affect your business in the long term. 

Your accountant or finance manager should be able to give you an honest view of your financial situation to avoid overleveraging. Understanding where your business stands financially will not only guide you in how much finance to seek, but also ensure that you are prepared for any future obligations.

2. Why do you need financing?

Clarity on why you need financing is essential. Whether it’s for expansion, bridging a cash flow gap, or investing in new technology – it’s crucial to understand exactly how the funds will be used. This knowledge will help you in selecting the right financing option and measuring the impact over time. It’s a step that should align your financial strategy with your overall business objectives, ensuring that every pound borrowed works towards delivering concrete, strategic goals.

3. Which financing option is right for you?

The market offers various financing options, from traditional loans to innovative solutions like Liquid Subscription’s cash acceleration. Evaluate each option’s suitability based on your business model, the amount required, repayment terms, ethics (where the money comes from) and how it aligns with your businesses long-term goals.

The landscape of financial solutions is vast and varied. Traditional loans might offer the security of fixed terms, but may not be as flexible as other options. On the other hand, cash acceleration will suit businesses with strong recurring revenue models. This step involves a detailed comparison of different financial products, assessing them against your business’s cash flow patterns, repayment capacity, and growth plans.

4. Have you considered the risks and benefits?

Every financial decision carries its own set of risks and benefits. For instance, while a loan might provide the necessary capital for expansion, it also brings with it the responsibility of regular repayments that could strain your cash flow. Borrowing against existing contracts is all very well, but what happens if you lose a large customer and have to repay the advance? 

Understanding these implications helps in preparing for and avoiding potential issues. An informed decision balances these risks against the potential growth and benefits, ensuring that any financial decision taken is an educated one.

5. How does financing align with your long-term objectives?

Finally, if you do decide that it’s the right time to raise finance, it’s important to understand how the chosen financing option fits into your long-term plan? Will it help you in building a solid foundation for future growth or offer flexibility for adapting to changes in the market? This perspective ensures that the financial decisions you make today are steps towards future success, rather than just short-term solutions.

Conclusion: 

Navigating the world of business finance requires careful consideration and strategic planning. By asking these essential questions, you are positioning your business to make informed and beneficial financial decisions. At B2B APM, we’re committed to guiding and supporting businesses through their financial journeys with ethical and practical solutions. If you’re thinking of taking your business to the next level through financing, book a call with our account team now to see how we can help you.