Ensuring a healthy cash flow is essential for any business, but especially for smaller businesses. SMEs have numerous options available to them if they require a cash injection. Here are three ways SMEs can improve their financial security.
Asset finance is a type of financing used by SMEs to borrow capital for the explicit purpose of investing in the equipment or stock they need to ensure profitability. Asset financing providers cover the assets’ upfront costs, with the SME paying a regular charge to cover the cost over a longer period. Asset finance is useful for startups working with tight budgets and established businesses that are starting to grow.
Equipment leasing and financing
Equipment leasing and financing are useful tools for any SME that relies on specific equipment to function, especially when that equipment is highly specialised. Equipment leasing is essentially the same as renting equipment, rather than purchasing it. Instead of paying for the equipment outright, the SME pays the leasing company a monthly fee.
Equipment financing is when an SME takes out a loan secured against a piece of equipment. For businesses that are struggling to drum up capital, this is a potentially very valuable method. Lenders are much more likely to agree to lend to a business if their loan is secured against a verifiable physical asset.
Venture capital funding
For SMEs that can prove they have strong growth potential, venture capital funding is a common alternative to private equity. Private equity is generally used for businesses that are already established and turning a profit. On the other hand, venture capital funding is aimed at new businesses that might not yet be profitable. With venture capital funding, SMEs don’t just get the cash injection; they also benefit from the venture capitalist’s experience and expertise. These investors often bring invaluable contacts with them and facilitate access to the rest of their network. If your SME has synergy potential with one of their other investments, they can bring your businesses together for your mutual benefit. The drawback is that you will have to accept losing some degree of control over your business, although the trade-off is often worth it.
Financial security – where to find out more
Tower leasing offers expert advice and various business finance products to help you achieve financial security for your SME business. Read about our business finance options or contact us today and let us help you.