Agency Funding: Strategies that work

If you run an agency it’s likely that at some point you’ll have needed to borrow cash for your business. Either to keep it afloat or to allow it to invest and grow. 

If it’s the former, then firstly I want you to know that you have failed in any way. Cashflow problems impact most businesses at some point. Even thriving businesses can be beset by customers paying late and unexpected costs. It’s a normal part of running a business and with the right support, it’s a place you can move through towards more stable financial ground.

So, if (or more likely when) you find yourself in the position of needing a cash injection, did you know that there are some simple things you can do to improve your chances of getting a loan? Or of getting that loan at a better rate?

Cashflow forecasting

Mapping out your cash flow is like seeing into the future. Before anything else, it’s important to get a clear view of how much you need to borrow and for how long you need to borrow it. Knowing both of these things will help you make the best decision when it comes to taking on finance.

Working together with an accountant to build a cash flow forecast will help you see when you are going to run out of money and how much cash you will be short. You can play around with this forecast to see the impact of decisions you plan on making. For example, if you decide it’s in the business’s interest to lay off a couple of employees, then working this through your cash flow forecast will help you see if that will make enough of a difference to your financial position or if you still need to seek funding.

Types of funding

When you’ve worked out how much funding your agency needs, the next step is to consider what types of funding might work best for you.

Some of the types of funding that are most commonly used by Agencies are regular loans, overdrafts, invoice financing and asset-backed loans. You’re probably already familiar with regular loans and overdrafts but invoice financing and asset-backed loans might be new to you.

Invoice financing is where you borrow money against your trade debtor balance. This works well if you have a large amount of debtors, perhaps for project work, who take a while to pay.

Asset-backed loans are where you borrow money using an asset as collateral, like a property you may own.

Both invoicing financing and asset-backed loans are options you can use to reduce the amount of interest you have to pay.

What’s your credit Rating?

As well as the type of funding you use, the other thing that will have a big impact on your business’s ability to borrow (and its cost of borrowing) is its credit rating.

Do you know what the credit rating of your business is? If not, go and find out!

Did you know that there’s a simple step you can take to improve your credit rating? Check out Capitaliser’s Credit review service. A simple and cost-effective way to improve your credit score. We’ve used this service for several clients and always had great success with it.

Where to go for funding

Traditionally the main source of finance for businesses has been from friends and family or through their business bank. But the world has moved on and there are now more places than ever before for you to go to seek funding for your business.

As well as speaking with your regular business bank, I recommend you reach out to both Capitalise and Swoop when you’re seeking funding. Both platforms have access to lenders not on the high street that might better meet your needs. Plus if you use accounting software like Xero, and your records are up to date, you can plug them into your accounting platform and they’ll be able to instantly share the best financing options with you.

A couple of other options to look at (though typically with higher interest costs) are Funding Circle and Iwoca.

Personal Guarantee

Right now interest rates are high and loans are harder to secure. It’s a challenging time to access funding but it’s not impossible. One thing lenders are likely to ask for is a personal guarantee for the loan. Think carefully about taking this on and the implications it could have on you and your family. Consider taking out personal guarantee insurance to reduce your risk.

Don’t do this alone!

Remember, you don’t need to do all this alone. With the support of your finance team, you can alleviate some of the stress you’re facing and access a better financing deal for your business.