Accountants and advisors: Spot seven reasons your clients might need funding

So, your clients think they’re ready for funding. Getting that cash injection into a business can be the catalyst to spark their next great plans. But timing is critical, and they should be confident that now is the right time to start the conversation with lending partners.  

But knowing how to start the conversation and the parts of your client’s business you’ll need to explain to investment partners is vital for getting the funding you need. You can begin by closely examining their business with them, finding the right areas a business loan could best support. For example, are there opportunities your clients miss due to a lack of funds? Would funding improve the everyday operation of their business? Could funding completely change the course of your client’s business through a management takeover or buyout? 

A business loan can completely transform your client’s trajectory, but a lender will be looking for a clear case on why to support them and for what reason. So here are some reasons why your clients could use funding and the benefit of using business financing. 

Funding asset purchases 

Your clients can start by assessing their current inventory. Do they have big contracts for new machinery, plants, or equipment to fulfil? Do any existing assets need replacing now or soon? Or are they in debt from buying any existing assets?

A lending partner will need to know where the value lies in the capital a business already owns and plans for investment in new areas. And though buying the tools they need would be viewed as essential, a lender will want to see that using funding is the best way to access these tools.

Easing cash flow capabilities 

Running a business will mean that money is constantly coming in and out of accounts, so your clients will need to make sure they have enough of a buffer so that what is flowing out doesn’t exceed what is flowing in. Do they have enough cash in their accounts to maintain a positive cash flow? 

And as the amount coming in and out of their account can change, are they confident that their cash flow predictions are accurate? They should also consider other large expenses that could be on the horizon – what impact would it have if they paid their next tax bill in full? Do they have any annual or repeat payments that could affect their ability to keep a positive cash flow? 

Refinancing current debt 

Debt is often a part of most businesses’ journey, and it isn’t necessarily a bad thing, but your clients will need to be aware of all their business’s existing debt and current rates. How much pressure are the repayments putting on their business? Are they significant enough that refinancing to a more favourable rate would be worth it? Could refinancing open their business up to new loan terms?

Refinancing can positively impact your client’s cash flow, so it is worth considering even when their business still has outstanding debt.   

Funding large stock purchases  

Your client may be approaching a busy period or want to ramp up production efforts early ahead of quieter times for their business – so can they afford the stock purchases they need to make? Investing in the capital they need can be a non-negotiable for many industries, but the amount they put in at this stage can reap bigger rewards later.

From investing more significant amounts, your clients can benefit from greater economies of scale, saving them cash and freeing them up to spend this elsewhere. So knowing their commitments to fixed costs like stock and production methods will have an impact when discussing how much funding they can take on.  

Supporting premises maintenance and expansion 

A shopfront or premises can be one of the largest fixed costs for a business, but also one of the most important ones as this is where customers interact with businesses, part with their money and decide whether to return.

So considering the impact your premises can have on a customer, you should ask your client if they have any plans to refurbish or develop their offices or shopfront. And if not, should they? How would they plan to finance this project? Will there also come a time when they will need larger premises to serve more customers, keep more stock or fit more staff? 

Realising growth opportunities 

Are there growth opportunities available to your client if they could access further cash? Could they make their growth plans a reality with funding backing them?  

While growth doesn’t always need funding behind it to make it happen, it can accelerate it, so your clients should consider how growing now with the help of funding can benefit them in the future. Longer-term opportunities could include opening new locations or acquiring a competitor.

Facilitating a management buy-out or buy-in

A management buy-out can be a significant shake-up in a company’s structure, so anyone investing or lending to your business will need to know about it. In addition, management changes can have significant implications for the direction of a business and how successful the company could be.

Do your clients have any upcoming discussions around shareholder structure changes? If there are management changes, what kind of visions do new leaders have for the business? And if there is a management buy-out, will the previous owners still be involved with the company when their roles change? 

Funding a business through a loan can open many more opportunities, though it comes with risks. Business leaders will need to understand the responsibilities of meeting the loan repayments and how this will need to be factored in in the future. 

But if the businesses you support have decided it’s the right move by looking at their affairs frankly, then reaching out to discuss with a lending partner is the next step. OakNorth works with accountancy partners to make securing client funding easier, so contact us today to start the conversation about the funding your clients need.

by Gavin Fell, VP, Partnerships at OakNorth Bank 

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