Securing finance can be a crucial step in the growth of small and medium sized enterprises. Whether you’re exploring more conventional business finance, tailored invoice finance solutions, trade finance to facilitate international trade or asset finance, knowing how to overcome common challenges in securing the capital you need is critical. 

Overcoming the Top 9 Challenges in Securing Finance

1. Incomplete or Ineffective Documentation

Not having the right documentation or not having complete documentation can sometimes derail a business finance application and, in the best case scenarios, cause the entire process to be slower and less efficient. When your business is facing gaps in cash flow and limited access to the working capital it needs, this can be highly disruptive.

To overcome this, make sure your financial records are as comprehensive, accurate and up-to-date as possible so you can provide the necessary documentation to your financial provider.

2. Limited Credit History

Before providing a loan or extending a line of credit, financial institutions will assess the credit score and history of a business. Having limited proof of a business’s ability to service a loan can mean that the financial provider is less likely to provide the finance needed.

Strategically building your credit history and ensuring it is positive will help your business create a paper-trail of its responsible financial practices and provide potential lenders the confidence they need to approve the application.

3. Access to Assets for Collateral

Business loans in particular require an asset, such as a property, to serve as collateral in the case of a default. Business owners who are trying to build a new business may not have the assert required for collateral.

There are other forms of finance, however, available to businesses that don’t require property as security. 

4. Risk of Market and Trade Volatility 

Market volatility and challenges in international trade cannot always be mitigated and may not always be reflective of your business’s financial stability and health. Nevertheless, it can be a challenge you need to overcome when applying for business finance.  

As a business, it is important that you implement risk management strategies that you can evidence as part of your application. For example, diversifying your market presence and widening your streams of income can alleviate some of the uncertainty inherent in trade and market dynamics.

5. Cash Flow Gaps and Invoice Delays

Finance providers and lenders look for proven, reliable revenue flowing into a business to give them confidence that the loan can be repaid. As a business, if you suffer from cash flow gaps as a result of invoice delays, this can be an impediment to obtaining finance.

Proactive cash flow management, favourable invoice terms, and closely monitored cash flows for seasonal fluctuation identification are all ways of overcoming this challenge. Additionally, Invoice Finance can provide an alternative solution for businesses who may be suffering cash flow gaps as a result of delayed payments for invoices.

6. Ensuring Regulatory Compliance

If you’re a business seeking secure finance, not being aware of any relevant regulatory compliance in your industry can be a preventative factor in you getting access to the working capital you need.

Keeping abreast of regulatory requirements is one way of overcoming this challenge. It allows you to establish robust and preliminary compliance procedures before the issues come to a head. Make sure to seek professional advice, for example from our lending specialists here at ScotPac, as well.

7. Business Competitiveness in the Market

Certain forms of business finance, such as a Business Loan, require more eligibility criteria to be fulfilled than others, such as Invoice Finance. Nevertheless, highly competitive industries and overcrowded markets can be an unfortunate impediment for SMEs accessing secure finance. 

One way to stand out in the market is by highlighting your business’s value propositions through a business plan or through the innovations you have invested in operationally. The more demonstrative your value proposition, the easier this challenge will be to overcome. 

8. Business Finance Solutions That Don’t Work For You

This challenge may be more reflective of a proposed business finance solution but when it comes to your business being able to access the funds it needs to succeed and grow, it’s a challenge to overcome nonetheless. Every business is unique and requires the specifics of its needs and objectives to be taken into consideration.

A not-fit-for-purpose financial solution will not only fail to provide the fuel your SME may need to grow, but also be difficult to obtain. With a specialist lender from ScotPac, you can be assured that our comprehensive consultation will allow our team to tailor the right business finance solution for you and your needs: Ensuring you are not only going to benefit from but succeed in getting the right finance solution. 

9. Cash Flow Management for Economic Downturns

For many business finance lenders a potential borrower’s ability to meet repayments is a cause of concern. This is only heightened during periods of economic downturns or expected economic downturns.

As a business, you should develop contingency plans for tough periods in the market for both your own sake and for the sake of obtaining the funding you need. Strong cash flow management practices and the build up of financial reserves will indicate that your SME is more resilient and prepared for economic downturns than other competitors in the space.

Contact ScotPac Today to Secure The Funding You Need

ScotPac is not just the largest non-bank lender across Australia and New Zealand, we’re also industry advocates of SMEs across market sectors. Our specialists have an in-depth understanding and wide range of experience working with businesses of all sizes and levels of complexity to access the funding they need to succeed.

We know that it can be challenging for business owners to not just run their business operations but also explore the available options for them to access the working capital they need. That’s why you should give us a call today. 

The lending specialists at your local ScotPac office work with you, as a partner – not a transaction, the find and tailor the right financial solution to suit your needs and meet your objectives.