There are perspectives on both sides of the fence.
Finance, when thought of simply as “debt”, can have a negative stigma because the general, conservative approach is that debt is dangerous, risky and should be avoided.
The notion of being a risk-averse business entrepreneur however is almost an oxymoron. The very act of starting a business often involves a degree of risk. Additionally, most business start-ups are driven by a passion for growth, which always requires money.
An important step and also a challenge therefore, for some business owners, is to reframe the idea of finance in a more positive light. Finance can be an effective way of having freedom to seize opportunities and fund the different stages of the business’ life cycle: from start-up, growth, to acquire and to sustain. In this way, finance is the solution rather than a debt burden and if the growth is profitable, then the finance used to facilitate this growth is indeed a good friend.
Once you accept the positive impact finance can have on your business, the next step is to decide what finance option suits. Finance can be hard to come by. Financiers traditionally like security to support their lending in the form of assets. This means service businesses – unlike those businesses that own their own manufacturing equipment or warehouses, for example – often find it difficult to obtain finance as they by nature don’t carry tangible assets.
Recruitment businesses, therefore, will often have limited options for finance unless they have personal assets (such as property) that they are willing to put at risk. Early-stage recruitment businesses face the double whammy of not having the assets nor the trading history that traditional lenders like to see. Banks generally like to see profitable trading and often for one to two years. The potential of the business is not considered until the runs are on the board.