The financing plan

A financing plan answers when money leaves the business and when it comes back. For companies that hold stock, that gap is the single most common reason for a good year ending badly.

Two different needs

Working capital funds the gap between paying suppliers and being paid by customers. It grows with turnover and is permanent, not temporary.

Growth funding pays for something that does not exist yet: a new range, a new market, a platform rebuild. It carries a different risk and belongs in a separate calculation.

Mixing the two in one request is the fastest way to be turned down, because the lender cannot see which risk is being taken.

The cash cycle

A shorter cycle frees cash without any change in profit. Negotiating longer supplier terms, reducing slow-moving stock and collecting faster each move the same number, and all three are available before any external funding is needed.

Sources

• Retained earnings, the cheapest and slowest
• Supplier credit, often the largest untapped source
• Bank facilities, available where there is security or a long record
• Revenue based finance, repaid as a share of turnover
• Equity, which does not have to be repaid and costs the most in the long run

Planning for the peak

Seasonal businesses need their funding in place months before the season. A plan built on last year's monthly figures shows the required moment precisely, and it is almost always earlier than expected.