Growing a business is tricky at the best of times, but what if growing that business makes it appear to be unprofitable? That was the issue faced by one of our clients. They are a law firm that wanted to create a whole new department to complement their conveyancing arm. That meant hiring new legal experts. At the same time, the business was also developing an app to help improve customers’ access to their services.
The app and expansion meant a large amount of cash was flowing out of the business. Because of this, 9 months’ worth of accounts showed the business operating at a loss. That scared off traditional lenders. Most banks and financing companies only make decisions based on previous results rather than understanding the underlying profitability of a firm. These lenders may ignore future forecasted growth or current work a business already has in the pipeline.
Thankfully, V4B Business Finance were able to obtain a loan with NO Director guarantees. We will also be working with the firm to support their future plans with new financing once they return to profitability next quarter. Our experts worked with the firm to understand their current business and the earning potential offered by the larger team. We found that the current investment in additional fee earners meant there was a higher commitment that filters through to the current margin now, but the new recruits would eventually increase their pipeline of business, which in turn would improve overall profitability.
By taking the time to understand our client, we were able to offer more than loans. We became an ally, able to work with lenders and speak their language while advocating for our customers. This allows us to help a wider variety of businesses, but it also means we can find companies more favourable loan terms.
Loans To Grow Your Firm
Our experts were able to secure a loan of £150,000 for the law firm, which will help them cover their initial expansion costs. We also have a plan to supply further funding toward the end of the year. At that point, they will be showing a profit again, and their new team will have become a revenue centre. This means they will likely be able to get a larger loan should they need one.
With the current financing in place, the firm was able to move forward with both the app and its new team. The money allowed them to cover their current costs without having to sacrifice cash flow or wait until they had the necessary funds saved up. That means more earning potential in the future and the ability to take advantage of an untapped market before their competition can react.
Results
We got our client the loan to kick start their intention and a strategy to obtain more once their accounts return to profitability. The firm is continuing to staff up and should soon be ready to start earning money from its new department sooner rather than later. They were also able to bring on some software experts to help build the app and make sure it delivers everything their customers need.
Once they feel they are ready, we will work with the business to get their second round of financing at the best possible terms.
Takeaways
Traditional lenders can be hard to work with for businesses looking to grow quickly. That is because many lenders do not understand the fluctuations in business and can only make decisions based on past results. This means they often miss the underlying profitability of a company. They simply do not have the time to get to know their potential customers and fully understand the business they may be lending to. By looking at our customers’ future earnings potential as well as their current finances, we are able to find them the loans they need.
If your business needs money to grow, bring on new talent or cover expenses, and you are worried that expanding will hurt your cash flow, call us today, and we can help you find the money you need in no time.
At V4B Business Finance, we can offer loans to help your business buy new equipment, upgrade your IT or refurbish your current premises. This allows your company to retain its own money for longer so it can invest in staff or new projects.
What would you implement for your company if you could unlock the money straight away?
- Fast access to funds
- Flexible payment options
- Dedicated account managers
- Smooth your cash flow
- No arrangement fees
- Great customer service
