By Andrew Welton, Relationship Development Director, CCBS
As businesses begin planning for the year ahead, conversations naturally turn to investment.
New equipment, acquisitions, recruitment plans and expansion opportunities all require careful consideration. Alongside those discussions comes another important question: how should those plans be funded?
In many cases, business owners already have an answer. Equipment investment suggests asset finance. A property acquisition points towards a commercial mortgage. Additional working capital may lead to a conversation about extending existing facilities.
The challenge is that the first funding option that comes to mind is not always the most effective one.
Looking beyond the obvious solution
When business owners identify a funding requirement, it’s natural to start with the solution that appears most closely linked to the need.
Often that approach works. Sometimes it doesn’t.
The most appropriate funding solution depends on more than the asset, project or opportunity being financed. Timescales, cash flow, existing facilities and longer-term business objectives can all influence which route delivers the best outcome.
In some cases, a combination of funding solutions may prove more effective than a single facility.
That’s why it’s important to look beyond the immediate requirement and consider what the business is trying to achieve. The right funding structure should support the wider objective, not simply provide access to capital.
The right question to ask
When considering a funding requirement, many business owners start by asking:
“What funding do we need?”
An equally important question is:
“What outcome are we trying to achieve?”
A business may be focused on moving quickly to seize an opportunity. Another may want to preserve working capital for future investment. Some may prioritise flexibility, while others are looking to minimise disruption to existing facilities.
The answer can have a significant impact on the most appropriate funding route.
By understanding the objective first, businesses can uncover solutions that may not have been obvious at the outset.
A recent example
We recently supported an engineering business in Tyne and Wear that required funding to support a property acquisition outside of a SIPP structure.
At first glance, a commercial mortgage appeared to be the logical solution. However, once the funding requirement, timescales and wider objectives were understood, it became clear another approach would better meet the client’s needs.
Instead, capital was unlocked from existing assets and supplemented with a business loan.
The result was a £100,000 funding package that enabled the acquisition to complete in weeks rather than months.
The exercise wasn’t about finding funding. It was about finding the most appropriate funding structure.
Why this matters when planning for next year
As businesses look ahead, funding conversations become more frequent. Investment opportunities, growth plans and strategic decisions often create funding requirements.
The key is not simply securing finance. It is identifying the most appropriate solution for the circumstances.
Exploring the available options can uncover a solution better aligned with the business’s objectives, timescales and longer-term plans. Whether the requirement is supporting growth, funding equipment, managing working capital or completing an acquisition, the most effective solution is not always the most obvious one.
The most successful outcomes rarely come from selecting the first available solution. They come from understanding the requirement, the objective and the full range of options available.
Andrew Welton is a Relationship Development Director at CCBS. He works with SME clients to understand their evolving business needs and funding requirements, helping them access finance for growth, investment, acquisitions and working capital.
www.ccbsg.co.uk | 0191 211 1471