The Right Funding Product for the Right Purpose: Empowering Business Growth Through Strategic Finance

Dan Peters, Director - Edgeview Finance

As business owners, we constantly strive to make decisions that fuel long-term success, growth, and sustainability. One of the most critical decisions revolves around how to fund the operational and capital needs of our businesses. Selecting the right financial product for the right purpose can mean the difference between maintaining healthy cash flow and inadvertently stifling your own growth.

At Edgeview Finance, we believe that a well-constructed debt funding plan should address both working capital and capital expenditure needs, aligning them with your business's long-term goals. This approach enables businesses to preserve cash for strategic investments while leveraging cost-effective financing solutions.

Understanding and Managing Working Capital

Did you know that a large proportion of small business failures are due to poor cash flow management? Ensuring you have the right working capital facilities in place is key to preventing these cash flow challenges. Whether it’s managing inventory turnover, receivables, or payables, your working capital cycle directly impacts your business’s ability to meet operational expenses.

The first step is to calculate your working capital funding gap—the number of days between paying your suppliers and getting paid by your customers. If there’s a gap, financing options such as business overdrafts, trade finance, or receivables finance can help bridge this shortfall, giving your business the liquidity it needs to operate efficiently.

Want to calculate your working capital gap? You can download our free Working Capital Worksheet to better understand your financing needs.

Capital Expenditure: The Cash vs. Debt Dilemma

Capital expenditure decisions, such as purchasing equipment or upgrading facilities, are often where businesses feel the pinch. The key question becomes: should you use cash, or should you finance the purchase?

For businesses focused on growth, preserving cash for future opportunities can be far more beneficial than using cash reserves to purchase long-term assets. Financing solutions such as asset finance or term loans offer a way to align debt with the useful life of the asset, allowing you to spread out costs over time and free up valuable cash for other investments.

By using debt strategically, you can achieve higher returns on working capital while keeping your cash reserves intact. This balanced approach positions your business for long-term success, without the strain of depleted cash flow.

Making Informed Financial Decisions

Whether you're evaluating how to finance your working capital needs or deciding between using cash or debt for capital expenditure, having a clear understanding of your financial options is crucial. The right funding plan allows your business to remain agile and prepared for future growth.

At Edgeview Finance, we specialise in helping businesses create customised funding plans that align with their unique business goals. Should you wish to discuss how we can assist in building a balanced financial strategy for your business, please contact us:  Edgeview Finance | Phone: 1300 280 895 | Email: dan.peters@edgeview.com.au