Funding business growth

Finances and funding are a vital aspect of successful business growth. Martin Brown, our CEO, looks at some key questions business owners have on this topic. 

 

• How much funding do I need to grow, and where can I get it? 

• Should I take out a loan, seek investors, or self-fund? 

• How do I improve my cash flow while investing in growth? 

• What financial metrics should I track to measure progress? 

 

How much funding do I need to grow my business, and where can I get it? 

How do we fuel SME growth in the UK. Small and medium-sized enterprises (SMEs) are the backbone of the UK economy, representing over 99% of all businesses. Growth is a key objective for many business owners, but scaling up requires strategic investment and funding.  Whichever source of funding you decide to use, lenders will want to see a robust business plan so make sure you have one in place to give you the best chance of securing the money you need for your growth plans. 

 

So, how much do you need? 

The amount varies depending on your sector, goals, and growth stage. In our experience at Elephants Child, a typical UK SME may require between £50,000 and £250,000 to expand operations, invest in technology, increase staff, or enter new markets. High-growth startups in sectors like fintech or healthtech may need upwards of £1 million for product development and market penetration. 

 

Where can you find the capital?  

Traditional options include bank loans and government-backed schemes like the British Business Bank’s Start Up Loans or the Recovery Loan Scheme. For more flexible funding, look at venture capital (VC), angel investors, or equity crowdfunding platforms. Asset-based lending and invoice financing can also help with short-term cash flow. Many business owners start with personal loans, credit cards and family and friends. Newer, fast-growing businesses might explore grant funding—especially in innovation-heavy sectors. Organisations like Innovate UK offer non-dilutive grants for R&D activities. Meanwhile, accelerators and growth hubs provide region-specific support and advice. 

Ultimately, the key to securing funding is a solid business plan, realistic financial projections, and a clear growth strategy. Whether you’re scaling your team or launching a new product, the right funding can accelerate your SME’s success. The right funding means matching funding to the need and understanding the numbers. 

 

Should I take out a loan, seek investors, or self-fund the growth of my business? 

Choosing how to fund your SME’s growth is a critical decision that depends on your business goals, risk tolerance, and financial situation. Here’s a breakdown of your main options: 

 

Taking Out a Loan 

Loans provide quick access to capital without giving up ownership. They’re ideal if you have steady cash flow and want to maintain control. UK SMEs can explore bank loans, government-backed schemes (like the Recovery Loan Scheme), or alternative lenders. However, you’ll need to manage repayments and interest—so ensure your growth plan supports future revenue. 

Best for: Stable businesses needing capital to scale operations or assets. 

 

Seeking Investors 

Equity funding from high-net-worth individuals, angel investors, venture capitalists, or crowdfunding platforms can inject significant growth capital and strategic guidance. You won’t repay the funds—but you’ll give up a share of ownership and decision-making power. This route is best for high-growth, scalable businesses looking to move quickly. 

Best for: Startups or SMEs in high-growth sectors like tech or biotech. 

 

Self-Funding 

Also called “bootstrapping,” this method uses personal savings or reinvested profits. It allows full control and avoids debt or dilution. However, it limits growth speed and can strain your finances. 

Best for: Early-stage businesses with modest capital needs and founders willing to take financial risk. 

There’s no one-size-fits-all answer. Consider your growth timeline, risk tolerance, and control preferences. Often, a hybrid approach – combining self-funding with loans or investment – offers the best balance. Securing that first “lead’ investor is a critical moment. 

  

How do I improve my business’s cash flow while investing in growth? 

Balancing cash flow and business growth is a challenge for many UK SMEs. Investing in new staff, equipment, or marketing can quickly drain resources – but strong cash flow is essential to sustain that growth. 

Start by understanding the numbers; specifically cashflow; by the day, month, rolling 3 and 12 months, be obsessive with it. Then tighten your working capital. Speed up cash receivables by invoicing promptly and maybe offering early payment discounts. At the same time, negotiate longer payment terms with suppliers to hold onto cash longer. Using cloud-based accounting software can give you real-time visibility into cash movements, helping you make smarter, faster decisions. 

Cut or delay non-essential expenses and focus spending on activities with clear ROI. For example, digital marketing or automation tools often yield measurable growth for less upfront cost. Leasing equipment instead of buying can preserve cash and reduce financial risk. 

Consider flexible financing to support investment without disrupting operations. Invoice financing, for instance, lets you unlock cash tied up in unpaid invoices. Business credit lines or revolving facilities can also offer short-term breathing room without long-term debt. 

If you’re investing heavily, keep a cash buffer in place – ideally 3–6 months of operating expenses – to weather unexpected challenges. Finally, a return to create detailed cash flow forecasts and revisit them regularly. Predicting cash shortages in advance gives you time to adjust plans or seek funding proactively. By managing cash carefully and aligning investments with growth priorities, SMEs can expand confidently without running dry. 

 

What financial metrics should I track to measure progress? 

To measure progress and make informed decisions, we recommend SMEs should regularly monitor key financial metrics. Here are the most important ones: 

1. Revenue Growth 

Track month-over-month and year-over-year sales. This shows whether your business is expanding and if your growth strategies are working. 

2. Gross Profit Margin 

Calculated as (Revenue – Cost of Goods Sold) ÷ Revenue. A healthy margin indicates you’re pricing correctly and managing direct costs effectively. 

3. Net Profit Margin 

Your bottom-line profitability after all expenses. It reveals how efficiently your business turns revenue into profit. 

4. Cash Flow 

Monitor both operating cash flow and free cash flow. Strong cash flow is vital for daily operations and reinvestment in growth. 

5. Customer Acquisition Cost (CAC) 

This measures how much you spend to acquire each new customer. It should be compared to Customer Lifetime Value (CLTV) to ensure profitability. 

6. Burn Rate 

Especially important for startups, burn rate shows how quickly you’re spending capital. Track it monthly to avoid cash shortfalls. 

7. Debtor Turnover 

This shows how quickly you collect payments. A slower turnover can hurt cash flow and signal weak credit controls. 

8. Debt-to-Equity Ratio 

This measures financial leverage. A high ratio might indicate over-reliance on borrowing, while a lower one suggests stability. 

 

Tracking these metrics helps you assess financial health, spot issues early, and guide your business’s growth with confidence. My key tip here is to make decisions that drive Return on Investment and enhance cashflow.  

Get your business growth plan in place, decide where you want to take your company,  and choose your funding source.  

Own your growth journey, it is yours and nobody else’s, make it a rich and rewarding experience.