Small and medium enterprises (SMEs) like yours frequently have to make substantial financial investments in order to expand. Obtaining business financing or a business loan for additional working capital may be one of the most important steps for uninterrupted growth and success, whether you're launching a new business or seeking to expand an existing one. Short-term goals, such as meeting immediate needs for operations, and long-term goals, such as achieving sustainable growth, are highly dependent on strategic financing decisions.
However, as a business proprietor or an entrepreneur, you may have already asked yourself, "When is the ideal time to submit a business financing application?" This question's simplicity conceals its complexity, as the timing of your financing application can have a significant impact on both the process for approval, the terms you are offered, and achieving your short-term goals that may affect the sustainability and growth of your business.
This article explores how to align your business financing application timeline with your SME's growth and sustainability objectives. By aligning your financing strategy with your short-term and long-term business objectives, you will effectively manage the timeline, which will ensure uninterrupted operations and promote sustainable growth for your business.
The impact of aligning business finance with your SME goals
The success of any SME depends on its ability to establish and attain its strategic goals. These objectives frequently encompass several aspects of business expansion, such as expanding market reach, increasing revenue, enhancing profitability, and improving operational efficiency, among others.
Achieving these may require resources, which, in many instances, take the form of business financing, and when financing is secured in accordance with your defined objectives, it becomes an influential instrument to help your business succeed and achieve its goals.
Here are some reasons why aligning your financing application with your goals is important:
1. Strategic focus
SMEs like yours operate in highly competitive markets where every resource counts. Keeping your financing aligned with your goals enables you to allocate resources to activities that contribute directly to your strategic vision, which enables you to make the most of your financial investments, ensuring they have a meaningful impact on your business' growth trajectory.
2. Optimization of resources
Proper financing and goal alignment reduce the risk of misallocation of funds. It ensures that the capital you receive is allocated to the areas of your business that have the greatest need. This not only improves productivity but also maximizes the return on investment (ROI) for every cent that your business expends.
3. Risk mitigation
SMEs are frequently exposed to financial insecurity and risks. Aligning your finances with your objectives aids in mitigating these risks. By procuring funds specifically for growth initiatives or specific challenges, you can protect your business from unexpected expenses and economic fluctuations and preserve its stability.
4. Confidence of lenders and investors
Lenders and investors seek businesses with a distinct vision and strategy. When your financing application correlates with your SME's objectives, it demonstrates your dedication and resource management skills. This, in turn, increases the likelihood of obtaining favorable terms and procuring funding, as well as the confidence of potential investors or funders.
5. Long-term viability
A financing strategy that supports your SME objectives contributes to your company's long-term viability. Instead of pursuing short-term solutions, you are positioning your business for long-term success. This approach not only benefits your current operations but also enhances your ability to withstand economic fluctuations and adapt to changing market conditions.
Aligning your business financing application with your SME goals
Aligning the timeline of your SME's application for business financing with its objectives requires careful planning and consideration of multiple factors. The following is a step-by-step process and list of essential factors that will help you achieve this alignment:
Step 1: Review and refine your SME's objectives
Ensure that your goals, growth objectives, and key performance indicators (KPIs) are well-defined and relevant. If necessary, adapt your strategies to reflect the current business environment.
Suppose your SME, a clothing manufacturer, intends to enter a new market in six months. However, you decided to prioritize your current market due to the demand and new orders of large corporate clients. By refining your objectives, you can ensure that your financing is consistent with your modified growth strategy.
Step 2: Determine your funding needs
Assess how much and when financing is needed based on your defined objectives. Consider both short-term (such as financial resources or working capital) and long-term (such as expansion, equipment acquisition, or manpower) financing requirements.
For instance, your clothing manufacturing company requires financing for both short-term working capital to meet increased production demand and long-term machinery investment. You acquire invoice financing through crowdfunding platforms, giving you immediate access to funds based on your unpaid invoices to help you fulfill orders quickly and alleviate or address cash flow constraints. Simultaneously, you allocate a portion of the invoice financing to the investment in machinery, which enables you to secure a competitive machinery deal without incurring additional loans. This strategy ensures effective capital utilization by addressing both short and long-term funding needs while minimizing the need for additional borrowing.
Step 3: Conduct a thorough financial evaluation to assess your company's financial health
Analyze your current financial status, cash flow, and profitability to ensure that your financial records are accurate and reflect the stability and growth potential of your business.
You analyze your company's financial health prior to submitting a business loan application and determine that its cash flow is strong but its profitability could be improved. This analysis compels you to seek financing not only to cover immediate expenses but also to invest in marketing, product development, and other vital facets of business operations in order to increase profitability.
Step 4: Explore available financing options
Consider the different types of business financing options or business loan options available to your SME. There are traditional business loan options in the market, such as term loans, credit lines, and equipment financing, among others, and there are also alternative business financing options, such as supplier finance from debt-crowdfunding platforms, particularly invoice financing and purchase order financing. Consider the advantages and disadvantages of each alternative in order to choose the one that best matches your objectives.
Whatever industry you belong to, you should explore invoice financing via fintech crowdfunding platforms for a more streamlined and accessible process. By utilizing your outstanding invoices, you can gain quick access to capital with this option, which is especially advantageous if you have a large number of unpaid invoices from reputable corporate clients, as it allows you to bridge the gap between billing and payment, ensuring smooth operations without incurring additional long-term debt.
Step 5: Observe economic conditions
Keep abreast of the economic climate, including trends in interest rates and market dynamics. You may decide to seek financing based on the current economic climate.
For example, every year during the holiday season, you observe a significant increase in demand for your B2B company. With the holiday season quickly approaching, you anticipate an increase in demand.
Recognizing the favorable economic climate and the opportunity to capitalize on increased holiday sales, you decide to pursue financing to expand your production capacity. Using invoice financing, you can secure the necessary funds based on your outstanding holiday orders, and this enables you to efficiently meet the demand spike, ensuring you have the capacity to fulfill orders on time and capitalize on the seasonal market opportunity while also strategically timing your financing application to coincide with periods of high revenue potential and meeting the growth objectives of your SME.
Step 6: Seek expert advice
Engage with financial experts that specialize in SME financing. They can provide invaluable insight regarding the timing of your application and the best financing options that may be available for your business and its industry.
Step 7: Prepare, gather required documentation and complete your business loan application as soon as possible
Keeping all your necessary documents, including financial statements, business plans, and supporting documentation, on hand can save you a lot of time and can affect how smooth your financing application will be.
Here's a scenario. Your B2B technology consulting firm has secured a significant deal for a complex IT project with a reputable client. However, after fulfilling a project for this corporate client, you have to wait for 60 days, as indicated in the payment terms, creating a cash flow shortfall for your company. Thus, with your documents on hand, such as your basic, business, financial, and trade documents, you immediately apply for invoice financing after recognizing the opportunity to undertake future projects while maintaining operational efficiency through invoice financing.
You can secure the funds necessary to cover project-related expenses, such as payroll, software licenses, and equipment purchases, while awaiting payment from the client according to the terms. This strategic action ensures that your B2B technology consulting firm can execute the project without hiccups, meet all of its financial obligations, and maintain uninterrupted service to clients.
Step 8: Be proactive and adaptable
Maintain a proactive financial and business management strategy. Be nimble in modifying your timeline and financing strategy in response to market changes.
In today's dynamic and competitive business environment, where opportunities and challenges frequently arise unexpectedly, it is not only prudent but essential to take proactive steps toward aligning your financing needs with various aspects of your business, particularly your goals. It ensures that your SME is adaptable and able to capitalize on growth opportunities and navigate market fluctuations.
By adhering to this process and considering these factors, your SME will be able to strategically align the timeline of your business financing application with its goals while also maximizing your outstanding invoices. This alignment improves your chances of securing appropriate financing at the right time to support the growth and success of your business.
Therefore, regardless of whether you are launching a new business or expanding an existing one, you should maximize the potential of financing alignment. By doing so, you enable your business to not only survive but also thrive, maximizing the success potential of your SME.
Investree Philippines, the first permanently licensed fintech crowdfunding platform here in the Philippines, offers alternative business financing or supplier finance options, such as invoice financing and purchase order financing. These financing alternatives can help you gain access to financing that may not be available through traditional financing institutions. Through the additional working capital Investree Philippines can provide your business with, you can leverage your SME and achieve continued business growth.
Explore Investree’s crowdfunding platform to learn more about its collateral-free, reliable, and risk-based invoice financing based on a debt crowdfunding concept with low interest rates and flexible payment terms at www.investree.ph. To learn more about business growth strategies, the benefits of crowdfunding platforms for SMEs, invoice financing, or purchase order financing, you may read more articles here.
