How to boost your business resilience with finance

A resilient business can successfully deal with unexpected challenges and find opportunities during periods of disruption.

An uncertain period of rising costs, high inflation, and potential recession can be a tricky time for owners of smaller businesses.

However, a business that builds its resilience now will help put solid foundations for future growth in place.

Funding is a key resource owners can use to become more resilient, but many can be discouraged from sourcing it due to a lack of understanding about how finance can be used.

Read our seven business tips for dealing with high inflation.

How funding can build business resilience

Boost your cash flow

Positive cash flow is crucial to a successful business and can be the difference between success and failure.

Your business will likely struggle if you don’t have enough money to pay wages, suppliers, rent, utilities, and other expenses.

Accessing finance can plug a cash shortfall and provide the necessary working capital.

Read our guide on why working capital is important for your business.

Dealing with the unexpected

As the coronavirus pandemic proved, unforeseen circumstances can occur, meaning businesses may need to adapt or change direction quickly.

Having funding available, such as a flexible line of credit or a business loan, could help to ensure you’re prepared when the unexpected happens.

Training and staff investment

Your workers are key to your business’ resilience, so it is essential that you look after them.

You could use funding to take on new staff to relieve pressures on your existing workforce, such as during periods of high or seasonal demand.

You could also use funding to pay for training to boost employee skills.

This will help to build staff retention, improve morale, increase productivity, and help make your business more competitive.

Read our tips on hiring new employees.

Retain customers

Businesses can become more resilient by encouraging customer loyalty.

Research shows that increasing customer loyalty by just 5% can lead to a 30% to 90% increase in customer lifetime profitability, boosting cash flow through regular purchases.

Funding could be invested in solutions to help retain customers, such as customer service software and online loyalty management systems.

Consolidate or refinance debt

If you already have business debt, you may be able to reduce your monthly payments by consolidating your existing loans into one loan with a lower interest rate.

This means you will free up working capital and improve your cash flow.

If you have just one loan, you could refinance it to reduce your monthly payments or get a more convenient payment structure.

This can also improve your cash flow.

Remember to seek independent financial advice though before proceeding with debt consolidation or refinancing.

Find out more in our guide to refinancing and business debt consolidation.

Improve your business credit score

Like personal credit scores, banks and other lenders use a business’ credit rating to make decisions about lending or investments.

Taking out a business loan and paying it back on time can help enhance your business credit score and improve your chances of being approved for a larger loan should your business require it.

How funding could support business growth

Ideas for how funding could be used to support business growth include:

Making acquisitions

Purchasing another company may help increase your business’ growth and remove competition.

This can be funded using acquisition finance.

Invest in research and development

Research and development (R&D) is the development of new products, services, and processes.

It has many benefits for business growth, including boosting sales, improving productivity, reaching new markets, and attracting new partnerships.

Various funding sources could be used to pay for R&D projects, including grants, business loans, and angel investment.

You could also claim R&D tax relief.

Buying new equipment and technology

To help your business grow, you might need to invest in new equipment and machinery or replace faulty or outdated appliances.

New technology and software, such as a customer relationship management system (CRM), can improve processes, may help make your business more efficient, and could help to boost sales.

These investments can be expensive though, so funding could help.

Marketing activity

To grow your business, you need to source new customers so you could use business funding to invest in marketing activity.

This might include paying for public relations, social media advertising, search engine optimisation, email marketing software, or building a new website.

Selling overseas

Exporting your products or services to other countries is a way to grow your business; however, it can be costly.

Funding could help cover international trade expenses such as market research, legal advice, translation services, customs compliance, shipping, insurance, export licences, packaging, and labour.

Read our guide on how to export to new markets.

Purchase stock

Not having enough stock could result in delays to deliveries and damage to your business’ reputation.

It is advisable to have buffer stock to manage increases in demand, such as the build-up to Christmas for retail and consumer brands.

There might also be times when you want to run promotions and discounts, so having stock available will help you do this.

You could buy the stock you need by taking out a business loan.