Between initiatives such as the Economic Action Plan – setting out the Welsh government’s approach to economic development over the next few years – and Office for National Statistics (ONS) figures from March revealing that Welsh exports are on the rise, it’s an exciting time to be doing business in Wales.
While it’s encouraging to see businesses looking to take on more staff and grow organically, it’s important that short-term expansion does not become a longer-term headache.
Taking on new staff in a short space of time can put a temporary strain on a business’s cashflow. Many new employees will need time and support to acclimatise and settle into their new roles, for example, and those in more specialised roles may also require additional training and equipment.
It’s important for companies to plan and consider the short-term finance options available to them to ensure they’re hiring – and growing – in a sustainable way.
One form of finance that can be useful for businesses that are growing due to increased demand is invoice finance. Given that an increase in orders often means a corresponding increase in the value of invoices issued, invoice finance can give firms quick and flexible access to finance when they need it most.
Invoice finance allows a business to access up to 90 per cent of the value of invoices issued ahead of being paid – often within 24 hours. This additional cash can then be re-invested into the business before the invoice is settled by the customer, helping to fund additional working costs such as an increased wage bill.
Alternatively, asset-based lending (ABL) allows businesses to borrow against the value of existing assets – such as property, inventory or equipment – as a cost-effective means of driving scalable growth. This is particularly useful for seasonal or rapidly-growing firms that need to release working capital to re-invest into other areas of the business, for example in equipment or training for new staff.
It’s also worth exploring the various options available to support businesses as they grow and take on more staff. For instance, we’ve pledged to lend up to £1.1 billion to Welsh businesses during 2019 to help them achieve their growth ambitions.
Overall, taking on new staff is an exciting stage of growth for businesses. Businesses that take the time to prepare their finances ahead of time – and with the right knowledge, tools and partner by their side – will be able to take a recruitment drive in their stride and use it to deliver sustainable growth.
David Beaumont is regional director for Lloyds Bank Commercial Banking in Wales