Why Is It Common For Businesses To Seek Funding?

Did you know that 99.7% of businesses in the U.S. are “small businesses” (defined as hiring fewer than 500 employees)? Out of this figure, 27% claimed that they were unable to receive the necessary business funding, impeding the growth of the business. What are some of the most common reasons businesses seek funding in today’s world? Let’s take a look at the top reasons below.

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Starting A Business

All businesses have one thing in common: they need funding to become a reality. Although most businesses are partially funded by the owners, it is rare that they are able to raise the business to profitability without seeking additional funding. This money is used to get a business off the ground and includes expenses such as marketing and office rental.

Working Capital

Defined as the money that is used to finance a business’s day-to-day operations, working capital is the most common reason businesses seek funding. This includes expenses incurred on a regular basis like rental and employees’ wages. Seeking funding can ease the monthly cash flow of a business, bridging the gap between payments coming in and going out.

Seeking funding for this purpose enables businesses to cover unexpected expenses that can crop up from time to time with the peace of mind that their daily running costs are covered. It also presents businesses with the potential to seize time-sensitive opportunities, such as new investments, without worrying about cash flow.

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Growth and Expansion

Businesses looking to expand often seek funding in order to rent additional facilities, hire new staff and offer a wider range of products. This is especially true of new businesses – it is extremely rare to be able to pay out of pocket for these expenses! Securing funding for this purpose means that businesses do not have to dip into their working capital to facilitate growth and bring the company to the next level.

Asset Purchase

With growth comes the need for new equipment and facilities. Businesses seek funding to cover these purchases so that they do not have to worry about jeopardizing their working capital. Common items that businesses require for expansion include vehicles, machinery, office furnishing and IT equipment. The issue of growth aside, such equipment is also crucial for a business’s daily operations and have to be purchased when old or worn out, making it an expense that cannot be delayed. Seeking funding for assets allows businesses to increase production and profitability without having to make a huge upfront payment.

Debt Restructuring

Keeping track of finances is rarely straightforward: many businesses end up with various loans from different creditors, taken out over a period of time for specific needs. This results in having to make repayments at varying interest rates on different days of the month. Not only is it difficult to keep track of, but having several repayments to make can also limit growth. Hence, some businesses seek funding to consolidate their existing debts, obtain lower interest rates and simply to free up cash for expansion.

Seeking funding for your business, but not sure where to look? CMS Funding provides the perfect solution! Our dedicated team strives to get back to you within 24 hours and can tailor a funding program to your company’s specific needs. Get in touch to see if you qualify for a loan today!