Entrepreneurs are inherently risk takers. They know that successfully creating a new business, standing out in a competitive industry, and eventually growing to prominence all depend on finding ways to stand out, and to provide new and innovative solutions to customers. It’s not a simple endeavour, of course, to leverage this knowledge to reach entrepreneurial success. Developing those solutions requires research, experimentation, and time. Innovative businesses need innovative employees, expertise, and the resources to test and implement new ideas. All of these things cost money that many businesses don’t have to spare unless that investment produces returns within a reasonable timeframe.
This is one important reason that businesses all over the world, cite a lack of financing as their primary impediment to growth. In order to develop innovative ideas, businesses first need funds, and the necessary cash flow solutions to manage the risk of potential setbacks.
Innovation is financially unpredictable
A single great idea can disrupt an entire industry, but a bad idea that looked good on paper can cause serious financial problems for an unprepared business. Moreover, even good products don’t always sell as expected, leading to lost investments, or potentially damaging supply shortages. The most common issue, however, is the innovative process itself. Product and process development aren’t things that can be easily forced into a budget and a timeframe. Sooner or later, every business will eventually find itself over budget, and out of time.
In this situation, businesses, especially relatively small startups, often won’t have access to additional funds through investors or their primary lenders. Moreover, those who do likely wouldn’t have weeks or months to wait on a loan application. Instead, they need fast funding options that are specifically designed to help them deal with cash flow issues in real time.
Alternative finance provides the tools businesses need
Unlike typical lending institutions, alternative finance institutions like Fifo Capital allow businesses to get the funding they need, when they need it. Rather than wading through complex loan applications and waiting for weeks, businesses can use these tools to deal with a cash flow issue in hours or days.
Invoice finance
Invoice finance is a way to give your business an advance on incoming revenues. Rather than borrowing money, businesses trade an outstanding invoice for a payment of most of its value. Because this doesn’t work like a loan, it doesn’t require time consuming credit checks, and doesn’t cost any interest. Instead, the fee is clearly set up front, and taken out of the client’s payment of the invoice, rather than billed to the business to be paid later. The financial institution goes on to collect the outstanding client payment on your behalf, before paying out the remaining funds, less the predetermined fee.
Supply chain finance
Where invoice financing helps businesses by boosting revenues, supply chain finance makes it possible to defer outgoing payments for a time. It works by allowing businesses to finance supplier payments through an investor-supplied credit fund with Fifo Capital, instead of paying out of pocket. The balance on that fund can then be paid off at a later date.
This is designed to allow businesses to keep their suppliers well funded, and their supply chains stable, even when short term revenues aren’t meeting expectations. By deferring outgoing payments, businesses can spend more of their current working capital on more pressing issues, such as getting a new product released, or making up for a budget shortfall.
A good financial toolbox creates opportunities for growth
Unlike traditional loans, these tools aren’t necessarily designed to directly fund your business’ expansion. Rather, they’re meant to give businesses the power to manage their cash flow, so that their operations can’t be disrupted by any individual short-term cash flow issues. For a business that’s looking to disrupt its industry, that means being able to invest in your future much more safely. Specifically, projects that run behind schedule or over budget can be bolstered to ensure their success. In more serious circumstances, when an innovative idea doesn’t pay off, it allows businesses to consolidate funds in order to recover without suffering potential impacts on their operations.
Businesses who don’t have this kind of financial security aren’t as able to manage risks, or to deal with cash flow interruptions. As a result, they have no choice but to limit their innovative activities. This conservative approach leaves them at a competitive disadvantage, and forces them to follow in the footsteps of others, trying to keep up instead of taking on a leading role. By educating themselves about the tools that are available, and putting them to use effectively, businesses can step out of this disadvantaged position, and set themselves up as industry trend setters, rather than followers.
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