How do I finance the growth of my business? – The Happy Financial

This way you finance a building, machines, stock or international expansion

Growth is good news. Your business is doing better, demand is increasing and the future seems bright. But growth costs money. Whether you need a larger building, want to purchase new machines, want to expand your stock or are considering moving abroad: without appropriate financing you often won’t get far. In this article, Marjan Heemskerk from The Happy Financial tells you how to choose the right financing for your growth plans and what you should pay attention to.

Why financing is crucial for growth

When your business grows, not only your income increases, but also your costs. You need more space, higher production capacity, extra staff or more stock. That requires money. With the right financing you can make this growth possible without jeopardizing your liquidity. Moreover, with external financing you can take advantage of opportunities more quickly, such as an acquisition or expansion into a new market.

The most important forms of financing

There are different ways to finance growth. Which form suits you best depends on your goal and the term of the investment.

Business loan or credit

For long-term investments such as a building, large machines or company takeovers business loan often suitable. You borrow a fixed amount that you pay back in installments. Banks and other lenders mainly look at your turnover, profit and cash flow.

Please keep in mind that there are are the differences between a business loan and credit.

Lease construction (machines or vehicles)

Bee rentN you do not buy immediately, but pay in monthly installments. This saves a lot of capital at once and keeps your liquidity up to standard. At the end of the term you can become the owner of the object (financial lease) or return it (operational lease).

Short-term credit or current account

Ideal for temporary shortages or seasonal peaks, for example if you need to purchase extra stock. You can withdraw and repay flexibly within an agreed limit.

Alternative financing

In addition to banks, there are more and more alternative forms of financingsuch as crowdfunding, credit unions and non-bank financiers. These parties are often more flexible than a bank and look more at the potential of your company.

Government Regulations

The government supports growing SMEs through guarantee schemes such as BMKB (Guarantee for SME credits) or the GO scheme (Guarantee for Business Financing). This means that the government partly guarantees your loan, so that financiers step in sooner.

Examples of growth financing

Now that you know what different forms of financing there are, it’s time to see what this looks like in practice. The right financing depends largely on what exactly you want to achieve with your company: investing in a building, machines, stock or international growth.

Financing a commercial property

Buying or building your own property is a big step. You usually take out a business mortgage for this purpose real estate financing off. The bank wants insight into your profit expectations, annual figures and a valuation of the property.

Make sure you make a realistic budget and can clearly show how the investment will pay for itself. Also consider additional costs such as maintenance, insurance and property taxes.

Financing of machines and inventory

New machines or equipment can increase your production capacity and make it more efficient, but are often expensive. Leasing is then attractive: you spread the costs and retain working capital.

Please note the conditions: term, interest, ownership and residual value differ per provider. Also check whether the lease affects your balance sheet position.

Financing inventory and working capital

Growth often means: more stock, longer delivery times or larger customers. You often have need additional liquidity to pre-finance purchases. You can use a current account credit or inventory financing for this.

Some financiers offer inventory financing where the inventory itself serves as collateral. This way you can switch faster without immediately having to pay a large amount of money.

Financing international growth

Moving abroad often requires more investments than many entrepreneurs think in advance. Consider export supplies, local partners, logistics and possibly on-site personnel.

Special financing is available for these plans, such as export credits, project financing or subsidies for international expansion. Institutions such as Invest International or RVO.nl can guide you in this.

Checklist: which financing suits your growth?

Which financing best suits your company depends on your growth phase, industry and risk appetite. However, there are a number of forms that in practice most often match specific growth goals of SMEs. Use this table as a starting point, not as a hard rule.

With this checklist you can quickly assess which form of financing suits your growth goals. Always discuss this with your advisor or financier for a tailor-made solution.

Common mistakes in growth financing

When looking for growth financing, entrepreneurs often make the same mistakes. These may seem small, but they can result in an application being rejected or you paying unnecessary interest. If you know which pitfalls are common, why they are risky and how to avoid them, you can take them into account in advance.

No clear investment and liquidity plan

Without a concrete plan, it is difficult for financiers to assess whether your investment is realistic and profitable. Moreover, you run the risk of running out of money as soon as there are setbacks. Make it clear in advance what you are investing, what it will yield and how you will absorb temporarily lower income.

An overly optimistic turnover forecast without a buffer

Too rosy expectations cause tension in your cash flow. If turnover is lower than planned, repayment can suddenly become difficult. Therefore, calculate different scenarios and build in a buffer of at least one to three months of fixed costs.

Choosing the wrong form of financing

Using a long-term loan for something short-term (such as inventory) can cost you an unnecessary amount of interest. Conversely, a short-term credit can put too much pressure on the cash flow. Always tailor the term and conditions to the lifespan of your investment.

Compare too few quotes or only look at interest

The lowest interest rate seems attractive, but does not say everything. Also pay attention to closing costs, mandatory securities and repayment schedules. Request at least three quotes and compare the total costs over the entire term.

Insufficient communication with your financier

Many entrepreneurs only keep their financier informed if there are problems, while transparency creates trust. By sharing figures and plans in a timely manner, you increase the chance of approval and you can often negotiate better terms.

Avoiding these mistakes will not only increase your chances of financing, but also the long-term financial stability of your business.

Step-by-step plan: this is how you arrange financing for your company

1. Determine what you need – premises, machines, stock, working capital or international expansion.
2. Calculate the investment and what it yields.
3. Make a liquidity forecast so that you know whether you can bear the repayment.
4. Choose the appropriate form of financing based on duration and risk.
5. Compare multiple providers and request quotes.
6. Prepare your application carefully with annual figures, business plan and forecasts.
7. Ask for advice with your accountant or an SME financing advisor.

Make sure financing is conscious

Growing without financial planning is like driving without a road map. By determining in advance what you want to achieve and what financing is required, you increase your chance of success. Have a solid plan, realistic forecasts and compare different options.