Growth is a natural aspiration for many businesses, but it comes with its own challenges, especially when it comes to securing the right funding and preparing for what’s next. Whether you’re expanding your operations, investing in new technology or entering new markets, having a solid plan in place is key. And of course, understanding the financial landscape is crucial to ensuring that your growth is both sustainable and successful.
Here, we’ll explore how to effectively prepare your business for growth and, perhaps more importantly, how to secure the funding needed to get you there.
Identifying the right type of funding
Choosing the right type of funding for your business can be tricky. There are many options available, from traditional bank loans to venture capital, and the right choice depends on your business model, sector and long-term goals.
For example, if you’re looking for stability and lower interest rates, bank loans may be a good option. However, if you need significant capital quickly and are willing to share ownership, venture capital might be worth exploring. Other options include government grants, peer-to-peer lending and private equity. Each has its benefits and drawbacks, so it’s important to carefully evaluate your options.
We always advise businesses to ask two questions when considering funding options:
- How much control are you willing to give up?
- What will the repayment terms look like?
Preparing for a funding application
When you’re applying for funding, whether from a bank, investor or grant provider, you’ll need to demonstrate that your business is in a strong position to scale. This often means preparing a robust business plan, complete with financial projections, cashflow statements and a clear growth strategy. Investors and lenders want to see that you’ve thought through your plans and understand the risks involved.
In particular, ensure your financials are up to date. It’s vital to show lenders that your business has been performing well and has the capacity to repay any loans or provide a return on investment. According to the British Business Bank, 63% of businesses seeking external finance are asked for financial information, including projections and business plans, when applying for loans or investment.
Maintaining cashflow
Growth often means increased costs in the short term – whether it’s hiring more staff, purchasing new equipment or entering new markets. It’s easy to get caught up in the excitement of expansion, but without adequate cashflow, even the most promising businesses can falter.
Before scaling up, it’s important to get a firm grasp on your cashflow situation. Do you have enough reserves to cover increased operating expenses? Will you be able to meet your existing obligations while expanding? These are questions every business owner should ask themselves before embarking on any growth journey.
Regular cashflow forecasting can help you anticipate any potential shortfalls and ensure that you have the funds available to keep operations running smoothly during periods of growth. It’s one thing to have a great business plan, but without cashflow, that plan can quickly fall apart.
Leveraging government support
Government grants and support schemes can offer a valuable source of funding, particularly for businesses in sectors like technology, manufacturing, and research and development (R&D). In fact, the UK government offers a variety of schemes to help businesses access the funding they need to grow, with specific incentives available for green technology, innovation and skills development.
The R&D tax credit, for instance, can provide significant financial support to businesses that invest in innovation. According to HMRC’s latest statistics, the average claim for small or medium-sized enterprises (SMEs) in 2023 was £57,228. However, the application process for these schemes can be complex, so it’s often worth seeking advice from an accountant or financial adviser to ensure you’re making the most of what’s available.
Avoiding common pitfalls
Scaling up comes with its fair share of risks, and it’s important to avoid the common mistakes that can hinder growth. One of the most significant risks is over-expansion – taking on too much, too quickly, without the infrastructure to support it. For example, hiring too many staff before your revenue can justify it or entering new markets before fully understanding the regulatory and financial implications.
Another common mistake is neglecting to prepare for increased tax liabilities. As your business grows, so too do your tax obligations. These can include higher corporation tax, VAT and national insurance contributions.
A comprehensive tax plan, developed with the help of an accountant, can help you mitigate these risks. Whether it’s through deferring liabilities, taking advantage of tax reliefs or optimising your business structure, planning ahead is essential.
Structuring your business for growth
As your business grows, you may need to reassess your structure to ensure it’s still fit for purpose. For instance, a limited company can offer significant benefits, particularly in terms of tax efficiency and liability protection. However, other structures, such as partnerships and limited liability partnerships (LLPs), may be more suited to businesses looking for flexibility or those operating in certain sectors.
One key consideration is how your business structure affects your ability to secure funding. Many investors prefer to invest in limited companies because of the protections they offer. Conversely, if you’re a sole trader or partnership, you may find that your personal liability makes securing funding more difficult.
How we can help
At Langdowns DFK, we’ve helped many businesses successfully navigate the complexities of scaling up. From securing funding to preparing detailed business plans and managing cashflow, we provide the expertise you need to grow with confidence. Our team works closely with you to understand your unique challenges and provide tailored advice that sets you on the path to sustainable success.
Whether you’re just starting to explore funding options or already have a plan in place, we’re here to help you every step of the way. Get in touch with us today.
