There’s a common belief in the business world that if a company is looking for finance, they’re looking to get bigger. Bigger premises, more staff, more orders, more clients, the works; after all, if you’re not growing larger, are you actually moving your business forward? Well, this week we’d like to address this topic and help to dispel yet another financial myth. A lot of companies will use finance to increase the size of their business – but it’s far from the only way to improve your company using a loan.
There’s a wide variety of purposes that finance can be used for, and by no means do all of them involve immediate outward “growth”. For example, one common situation we’ve seen over the years is an existing business raising finance to buy out their leasehold. If you’re operating on a leasehold, you’re inherently on somewhat uncertain ground (no pun intended). Without the ownership of the property they stand on, leasehold businesses are subject to the decisions of the freehold owner. Buying out that freehold not only secures a business for the future, but puts that business in a much more stable position for raising further finance.
Leasehold purchases certainly aren’t the only use for finance that improves rather than expands, though. Many businesses choose to use the funds raised to refine their existing services and improve their business offering, rather than trying to expand into new areas and numbers. We’ve raised finance for factories, for example, who didn’t want to move into a new premises with more space for orders and workers. Instead, they were looking to buy new, better equipment and improve the efficiency of their existing services, bringing in more business through faster turnarounds and higher-quality goods.
For many businesses, using finance for expansion purposes is the right call. The extra funds raised through finance can give you the push to take your business to the next level. However, we should never see it as the only option!