Why Securing Funds from a Position of Strength Wins Every Time 

Accessing money is often the difference between success and failure for small and medium-sized businesses. While funding often helps many small businesses succeed, not all opportunities are equal. How much money you can get and what kind of deal you can get depends on how healthy your business finances are.

Why does this matter? Think about it like this: just as a healthy athlete runs better in a race, a business with healthy money has a better chance of getting good loans and deals. Who wouldn’t want that when business is so competitive?

Let’s look at why you should try to get money when your business is doing well with its money.

Understanding Your Business Money

Looking at Balance Sheets

A balance sheet shows what you have (your assets) and what you owe (your debts). Why is that important? Well, when you ask for money, a lender or investor will want to see your balance sheet. They want to know if your whole business is healthy, not just that you’re making money at the moment.

Understanding Cash Flow

A cash flow report will often tell you how much cash is coming in and going out of your business in a month or quarter. Of course, the more money that is coming in over leaving is good cash flow—and that’s a good thing! When it happens the other way around—where you’re spending more than you get, bad cash flow—that could be your downfall. Aside from simply keeping the lenders off your back, good cash flow allows your business to expand and try new things.

Reading Earnings Reports

Think of an earnings report as your business’s report card. It is a record of your profits and losses over time-usually over the course of a three-month or yearly period. When your business has one bad quarter, that is not too bad, but when earnings continue to slide, that is what concerns lenders and investors.

Steady, reliable income shows that your business is stable and well-run. And when you need money, stability is what investors look for.

Benefits of Accessing Capital When Strong

Now that you have a basic understanding of financial reports, let’s talk about why it’s better to go out for funding when your business is strong.

Better Interest Rates

First, let’s talk about interest rates—that percentage that determines how much extra you pay back on a loan. When your business is financially strong, lenders see you as less risky. Less risk, as a rule, means lower interest rates.

Here’s an example: Company A has good finances—steady cash flow, regular earnings, and so on. Company B doesn’t. Which company will get better interest rates? Company A, of course. Over time, even a slightly lower interest rate can save you lots of money.

More Power to Negotiate

When your business is financially fit, you are not some company begging for money but a valuable customer. And that gives you bargaining power.

You are in a position to talk about interest rates, payback dates of the loan and rules to abide by. You are similar to a person who goes to buy a car with cash in hand—you hold the upper hand.

Building Better Business Relationships

It is not only a matter of money but also of relationships. Lenders and investors prefer to build long-term relationships with solvent businesses rather than just completing one deal.

Good finances mean your business is sound and here to stay. This will eventually ensure easier funding in the future and possibly good business contacts.

Problems with Getting Funding When You’re Weak

Now, let’s have a look at some of the things that can go wrong in an attempt to get funding with a less-than-ideal financial history.

High Interest Rates and Harsh Terms

When lenders believe that your business is a risk, they impose higher interest rates as a means of self-insuring. Over time, this quickly makes your loan far more expensive than originally intended.

You may also be obliged to follow strict rules regarding paying back the money quickly or face operational limits on how to run your business. What initially appeared to be a helpful loan may become a major problem.

Damage to Your Business Reputation

Remember that people talk. If you’re always scrambling for money or unable to repay loans, word will get out. Suppliers may request advance payment terms, and customers may be wary of committing their long-term business.

Finally, quality employees like to work with stable companies. If your company appears unstable, you’ll struggle to attract skilled employees.

Missing Opportunities

With weak finances, you may have to forgo opportunities for expansion. You perhaps can’t afford to scale up or take advantage of bulk discounts due to insufficient cash in your account. This holds you back and gives your competition a lead.

How to Improve Your Finances Before Seeking Funding

Cutting Costs

Start by looking at where you can save money. You don’t need to fire people or make big changes. Often, small savings add up.

Look at your regular expenses. Can you get better deals from suppliers? Can you use less energy in your building? Could some new technology help you work more efficiently? These small changes can make your business more attractive to lenders.

Growing Your Revenue

Next, consider your income streams. Is your revenue coming from just one or two clients? That’s risky. Look to diversify your income.

Consider offering new products or services, finding new customers, or selling more to existing customers. Having multiple revenue streams helps protect your business if one source falters.

Planning Ahead

Finally, there is the need for good planning. Make use of budgets and forecasts to identify problems before they happen. This allows your business the opportunity to make necessary adjustments.

There are numerous easy-to-use computer programmes that will help you plan your finances. Take advantage of these to track how you’re doing and to evaluate how various decisions could impact your business.

Final Thoughts

We have covered a lot, from understanding financial reports to knowing the advantages and disadvantages of getting funding at different times.

What is the key takeaway? When you raise funds while your business is in strong financial health, you are not just raising money but creating a foundation for growth and long-term success.

Sometimes, you have to seek finance when your finances are not good. Try to make this rare because improving your financial health will give your business the best chance for growth and success.

What to Do Next

Review your financial reports. If the outlook doesn’t look so good, start making some changes in your finances. Reduce costs where possible, find new ways to bring in money, and make solid financial plans.

Suppose your finances are already strong, great! Apply that strength to get better deals, build stronger business relationships, and create a better future for your business.

Remember, funding isn’t all about the money; it’s about making smart business moves. Getting funding at the right time and in the right way is best for your business, but first, you need to lay the foundation by making your finances strong.

While good finances are a good starting point, choosing the right lender is equally important. That’s where Nucleus comes in. We’re here to support your business with funding solutions that fit your needs, whether your finances are already strong or you’re working to improve them. Apply for a loan with Nucleus today!