If you’re going to ‘lump it’, leave it

Every business is different. Regardless of how similar they may look from the outside, every business dances their own unique dance, and grows in their own unique way. For some, business growth is a gradual pathway, getting stronger and bigger over time; while for others, growth is a bumpy ride with twists and turns, and ups and downs.
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But whether it’s gradual or bumpy, most business owners at some stage in the journey, want their creation to grow. So the question often is: what level of finance do I need to make this happen?

Funding business growth isn’t as simple as picking a lender and applying for finance. Sure, you can take that approach, get the funds that you’ve estimated you need, and carry on with your growth plans – but it’s a missed opportunity.

Taking a vanilla ‘lump sum’ approach to your business growth funding can often result in paying for finance when you don’t need it, reducing profit potential and lumbering your business with debt that doesn’t serve the purpose it was taken on for.

By mapping-out how and when you’re going to use your growth-funding, you can figure out the most appropriate finance structure for your business and its unique dance. It’s a not a complicated exercise, it just requires a bit of time and an attentive sounding-board to clearly define and articulate the detail.

Here’s an example: A manufacturer and importer we recently worked with had a steady business in a seasonal industry. The business owner was being presented with further opportunities that would significantly increase his turnover and profitability. However, to avail of the opportunity, he had to incur some significant upfront costs. But, being a seasonal business, these costs spike at particular time of the year and only need to be carried for a short period of time.

His bank offered an overdraft facility based on his total annual turnover from last year, which was just too small and was available all the time. It just wouldn’t make sense for the business to have an ongoing finance facility of that size. Notwithstanding the fact that it will sit there all the time costing them hard-earned margin when it’s not needed. By thinking through the detail and clearly articulating what the finance was needed for and when, we were able to come up with a structure that meant the funding was an ideal fit for purpose – funding business growth and helping our client make some money.

Get some clarity on your business funding needs, purpose and structure

If business growth is on the agenda and you’re considering your funding options, we welcome you to take advantage our complimentary ‘sounding-board’ service.

It’s an opportunity to take an hour out of the day to talk through your plans with a business finance expert who can help you: define your growth expectations; articulate the milestones the finance has to achieve to be worthwhile; and how to structure your growth funding to best serve your plans. Business growth funding – in our book – should always be a well-placed business resource, not just debt for the sake of debt.

Give us a call on 09 215 9364 or email us at fundgrowth@merx.co.nz if you’d like to set up a time to talk.

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