How To Finance Medium-Sized Businesses

Your company might be family-owned and operated, but if it makes enough money, it won’t be regarded as a small business anymore. You might not think you’re ready to be counted as one of the large companies in this economy yet, and you’re probably right if you have less than 250 employees but more income than a small business can make and still qualify for financing that’s set aside for them. Most lenders and the Companies Act of 2006 consider a company like that to be a medium-sized business, and they have a unique credit footprint that shifts their access to finances. The good news is that this mostly means increased options, but it does require you to relearn your cash flow management and capital investment strategies to suit your company’s new status.

Medium-sized companies are generally seen as more stable investments by lenders because they tend to have established assets like real estate and heavy equipment or vehicles. They also tend to have an operating history and income that makes projections easier to trust and establishes a history of having managed the company’s cash and credit well. That makes them more likely to get standard business loans, credit lines, and other traditional lending products. It also changes their relationship to many short-term lending models.

Certain financing options like merchant cash advances have top-end limits that make them more appropriate to small businesses, but others like factoring or asset-based financing are designed to scale with your company, providing medium-sized businesses with greater options and more reach when they need working capital. If you’re already participating in credit lines and short-term financing programs regularly, it’s time to talk to your providers about what they can do for a medium-sized business, because you might be able to increase the amounts you are getting in advances.

Leases and trade credit tend to be easier to access and come with more favorable terms as you grow, too. Of course, this assumes a decent business credit score. While your site might be an asset when it comes to accessing credit, you do still need to watch your debt to income ratios and your overhead from debt. New resources can lead to missteps in management as you pivot your cash management to a new system, so take it slow and don’t be afraid to backtrack and consider your options when you are faced with results that don’t line up with your expectations. You’re running a medium-sized business, you have options now.

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