Sometimes, thriving businesses that have managed to find the most lucrative market spaces, will eventually face the necessity of keeping their growth in check. The channels for business development will keep opening up while the venture itself will struggle to find funds that could complement the available opportunities. This problem is not necessarily induced by stagnant trade practices or by a saturated market space. The dilemma itself is invariably placed on established invoicing practices that tend to put growing organisations on the back foot. A regular invoice directed to a buyer from vendors would take close to 20 to 30 days to be financed in full. This brief space of 20 to 30 days is extremely detrimental to emerging businesses who are looking to consolidate their hold on the consumer demand or buyer requirements. The ethos of a rigid market structure can make even opportunities seem like risky strategies. Here is why pursuing intelligent growth should be your company’s priority agenda.
Why Pursue Growth Despite the Flaws
In some cases, it is an intelligent business plan to choose not to grow exponentially. This usually depends on the nature of the business itself or on the underlying expectations placed on future prospects. The side effect of pursuing rapid growth models would later manifest themselves in employee stress and even lead to compromised quality in production.
On the other hand, economies of scale is a compelling argument that any business could benefit from in a largely lucrative manner. This concept depicts the scenario where increased production output leads to lower costs which are caused by an inverse relationship between per unit costs and the quantity of the produced product itself. Economies of scale is a prominent reason why large-scale organisations manage to function profitably while catering to a tremendously large customer base. Organisations that manage to sustain their growth pattern and reach economies of scale will inherently absorb the drawbacks of set invoice financing practices in a better manner.
Alternative Financing Options
The 21st century offers a plethora of options for businesses looking to borrow money for the purpose of advancement. Angel investors, Venture capitalists and online lending platforms are all viable options that can inject your business with critical capital. Of the three options mentioned above, Angel investors are quite possibly the best option because they make it a point to fund emerging ventures that have not yet developed proven market acclimatisation techniques. Venture capitalist funding, on the other hand, is more about the projections of growth a company an organisation is capable of exhibiting.
A singular problem afflicts all three of the options given above. And that is the high price that comes in the wake of availing these lending options. Angel investors typically require 20 to 30 percent as the internal rate of returns. Venture capitalists who use pooled resources from professionally managed funds, are time-bound and expect the company to reach liquidity in 5-7 years time. This could essentially mean a lack of choice in the direction of the organisation’s progression. The online lending industry also faces its own share of credibility crisis that stems from unsustainable lending habits.
Off-Balance Sheet Financing
The importance of keeping liabilities off balance sheets can’t be emphasised enough for ventures that are thinking of growing at a faster rate. This term is usually attached to business prospects such as joint ventures and operating leases etc. In essence, off-balance sheet financing lets the liability of debt be kept out of the debtor’s balance sheet. KredX offers this method of financing through its invoice discounting process.
In the case of business ventures, the right decisions are many and the wrong ones are, of course, bountiful. The hardest business decision, however, would be recognising the right moment that can propel your organisation forward. KredX is the perfect vehicle to utilise risk-free financing. Our hybrid lending model does not dictate the growth rate your company would need to adapt, unlike popular options such as VC funding or angel investing. In essence, KredX is not even a lender by design, our business simply accentuates the speed at which your pending invoices will get financed.
The Way Forward
Often small companies lose out on their independence when pursuing growth models that cannot be realistically achieved with in-house profits. Most times, this makes growth itself an expensive prospect that just cannot be implemented. KredX is a linear solution that growing organisations can avail when the idea of growth itself can mean tremendous liability. Reorganising the working capital cycle for earlier payments will have purposeful consequences. Bypassing the difficulties posed by traditional invoicing methods, KredX will provide growing companies an alternate path that is devoid of external pressures that can arise from availing traditional lending practices.