3 working capital financing strategies to help grow your company

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As an ambitious Irish SME, you’re probably trying to figure out how to make the most of working capital. Should you opt for a conservative growth approach or a more aggressive strategy to scale your business? And once you’ve decided on your approach, how will you finance additional working capital?

This article will run you through your options for working capital financing strategies as an Irish SME. We’ll also discuss in detail the different kinds of funding available to Irish SMEs, how Financefair can help, and some examples of working capital financing strategies for SaaS, ecommerce, and recruitment businesses. 

In this article:

What should my working capital financing strategy be?
What are your options for working capital financing?
Revenue based finance: capital that grows with you
Online business line of credit: only pay for the funding you use
Selective invoice financing: get an advance on your invoices, to alleviate a cash flow pinch
How to choose the best working capital financing facility for your company
Working capital financing strategy for a SAAS business
Working capital financing strategy for an ecommerce business
Working capital financing strategy for a recruitment business
Why choose Financefair for your working capital needs? 

Are you an Irish SME looking for working capital to grow your business or alleviate a cash flow pinch? Apply today 

What should my working capital financing strategy be? 

Before picking a financing strategy, it’s worth thinking about how conservative or aggressive you want to be.

Here are the three most common working capital financing strategies: 

Conservative approach: if you’re debt-averse

A conservative approach prioritises safety and liquidity. SMEs who opt for this approach tend to minimise risk by maintaining high levels of cash reserves and relying less on external funding. 

This approach is often useful for debt-averse businesses in industries with volatile cash flows.

While a conservative approach offers stability, it can result in missed opportunities. For example, a business might miss out on a bulk-buy discount because it’s reluctant to rely too much on external finance to buy extra stock. 

If this is the approach you’d want to take, then an online business line of credit might be a good source of working capital for you.

This offers you a pre-approved revolving line that you can tap into when you need to. You’ll only pay for what you use, and you’re not locked into a long-term financial commitment. 

Alternatively, if you find yourself regularly waiting 30-60 days (or more) for your invoices to get paid, invoice financing might be a good source of working capital. This allows you to get an advance on your invoice and get paid within 24 hours

Matching approach(also known as hedging): if you’d prefer short-term borrowing

The matching approach aims to balance risk and return by aligning the duration of external working capital financing closely with the lifecycle of financed assets. For instance, if a business wants to take advantage of a bulk-buy discount, it might take out short-term debt that will be paid off quickly. Alternatively, it may decide to take out a term loan for a longer-term investment: such as for strategic projects such as product development, investment in marketing, hiring, and internal digital transformation.

This approach helps businesses manage liquidity risk and financing costs. However, it can be difficult to execute. Obtaining financing with terms that perfectly match a strategic product’s lifecycle can be challenging and can result in a resource drain in managing the administration of constantly setting up new, short-term finance deals. 

Likewise, a company relying on a matching approach may be surprised by sudden changes in the market and be slow to access funding: as setting up separate financing agreements for each asset requirement takes time. 

A business using the matching approach might find revenue-based finance useful. This funding is based on a percentage of your projected revenue. As this is tied to your business performance, there’s little chance of overborrowing. When you use Financefair, we can set up a revenue based finance facility that gives you an injection of capital when you need it most. 

Aggressive approach: if you’re comfortable with risk

An aggressive working capital financing strategy involves taking on high risk for (potentially) high returns. SMEs taking this approach use more short-term financing to fund current assets as well as a portion of long-term assets.

For instance, ​​a retail company might rely heavily on short-term loans to quickly increase its inventory before a major holiday season, betting on high sales to pay off the loans swiftly. This strategy amplifies potential profits but also increases the risk of financial strain (and overstocking) if the expected sales surge doesn’t actually materialise.

The choice between these strategies depends on various factors, including your risk tolerance, growth objectives, individual characteristics, and current market conditions. 

Selective invoice financing can be useful for a business taking a more aggressive approach. You can advance your customer invoices and get paid in 24 hours – meaning you don’t miss out on any growth opportunities while waiting for your customers to pay you. 

What are your options for working capital financing? 

Whether you choose a conservative, hedging, or aggressive approach, you’ll need a flexible source of working capital to manage cash flow gaps and capitalise on growth opportunities.

Here are some of the most popular working capital financing options for an Irish SME: 

Working capital financing Pros Cons
Bank loans • Access to a large amount of funds
• Fixed interest rates and terms for predictable repayments
• Often have eligibility and credit requirements
• Collateral often required
• Can take a long time to apply and receive funds
Business Overdraft • Allows account balance to fall below zero up to a set limit
• Pay interest only on the overdrawn amount
• Higher interest rates than traditional loans
• Fees for exceeding the overdraft limit
• Can quickly become overwhelming
Business line of credit • Pre-approved revolving credit line
• Only pay for what you use
• Fast access to capital
• Limited levels of funding
• Interest cost can be high if poorly managed
Selective invoice financing • Fills a cash flow gap and advances outstanding invoices
• Doesn’t require traditional collateral or personal guarantee
• Fast access to capital
• Limited to 90% of invoice value
Revenue based finance • Based on projected revenue, no overborrowing risk
• No need for collateral
• Funding line grows with revenue
• More expensive than traditional loans
• Suitable for companies with predictable revenues
Crowdfunding • Raise funds from many investors without equity loss
• Engages customers, aids in brand building
• Requires significant marketing effort
• Funding target may not be met
• Platform fees reduce available capital
Venture Capital • Access to significant funds and resources
• Valuable for network connections and business advice
• Highly competitive, lengthy process
• Usually requires equity and control concessions
• Comes with high growth and ROI expectations

At Financefair, we offer revenue based finance, selective invoice financing, and business line of credit.

These options can help you make the most of your working capital financing strategy: without getting into long-term debt or diluting the equity in your business. 

Read on to learn how each option works and which is best for your working capital financing strategy. 

Prefer to talk to an expert to find out the best working capital strategy for your business? Talk to one of our experts

Revenue based financing: capital that grows with you

Revenue-based finance offers your business an infusion of capital by strategically using the projected revenue from your existing contracts. By aligning the financing directly with your projected revenue streams, you can ensure that the capital boost you receive is sustainable and tailored to your business’s growth trajectory. 

This makes revenue-based finance an ideal choice for companies looking for access to working capital without compromising their equity or taking on burdensome debt.

The facility’s operation will differ depending on your financing provider. At Financefair, we’ll examine your forecasted revenue over the next 12 months and your predicted growth rate. This information allows us to determine how much funding we can offer you. We’ll also discuss your business needs with you in detail to ensure you have the right amount of working capital at the right time. 

At Financefair, your facility will be based on:

  • 20% of your annual recurring revenue (ARR)
    or
  • 70% of your quarterly revenue

Once we have all the necessary information, we’ll calculate and confirm the total approved amount we can offer you.

You’re eligible for a revenue based finance facility with Financefair if you meet the following requirements: 

  • Limited company in Ireland with at least 2 directors
  • Trading for at least 1 year
  • Minimum turnover of €300k

Revenue based finance is an excellent source of working capital because we base the size of your facility on your company’s revenue. This means you can get more funding as your revenue grows. And if your projected revenue decreases, you will still be able to access funding relative to the revenue you are generating.

You’ll pay three fees: a platform fee, a monthly facility fee, and a discount charge. Here’s an example of cost:

Annual recurring revenue, including VAT Estimated amount of funding we can advance Estimated cost per 30 days
€500,000 €100,000 €1,500
€750,000 €150,000 €2,250
€1,000,000 €200,000 €3,000

Try the calculator for yourself on our revenue based financing page

For an in-depth working example and more information, check out our revenue based financing guide

Invoice financing: plug cash flow gaps by getting an advance on your invoices

Invoice financing (sometimes called invoice discounting) is an innovative working capital facility that allows you to leverage your existing customer book to draw capital into your business. This eliminates the cash flow gap when waiting for your customers to pay your invoice for work completed (which can take 30-60 days, or even longer). 

With an invoice financing facility from Financefair, you can get an advance of up to 90% of that invoice within 24 hours of raising it. 

There are three types of invoice financing: 

  1. Full book invoice financing: You get an advance on all your invoices.
  2. Selective invoice financing: You only get an advance on the invoices you choose to raise. 
  3. Invoice factoring: Your funding provider takes an operational role in your business and takes over credit control. 

Financefair is the only provider of selective invoice financing in Ireland. 

Invoice financing facilities are also either disclosed (non-confidential) or undisclosed (confidential)

  • Disclosed invoice financing: Your customers will know you’re using an invoice financing facility. 
  • Undisclosed invoice financing: Your customers will assume they’re paying you directly. At Financefair, our invoice financing facilities are always undisclosed and completely confidential. 

Here’s the eligibility for invoice financing with Financefair:

  • Limited company with at least two directors
  • Trading for at least three years
  • Minimum annual turnover of €300,000
  • Average debtor book of €500,000

How does invoice financing work?

Invoice financing will work slightly differently depending on your finance provider, but here’s how it works at Financefair: 

  1. You issue an invoice and raise it on our online platform. Unlike other invoice financing platforms, you only need to raise the invoices you choose at Financefair. 
  2. We’ll give you an already agreed-upon portion of the invoice’s value (up to 90%) as an advance. We’ll pay this into your account within 24 hours. 
  3. After the payment terms are up, your customer pays the invoice amount into an account with your company name, but controlled by Financefair – for 100% discretion. 
  4. As we offer an undisclosed facility, your customers won’t know they’re paying us. 
    1. If you opt for a disclosed facility with a different provider, your customer will know you’re using invoice financing.
  5. We’ll transfer you the remainder of the invoice value minus fees. 
    1. Our pricing structure at Financefair is simple and transparent. You’ll pay an annual platform fee minus any discounts for a strong credit rating. 

Here’s an example of what you might pay: 

Size of facility Cost per 30 days
€150,000 €1,500
€500,000 €5,000
€1,000,000 €10,000

To get an exact figure for your business, try our invoice financing calculator.

For more information on invoice financing, read our guide.

Line of credit: only pay for what you borrow 

An online business line of credit gives your business access to a pre-approved line of funding when you need a boost of working capital. It functions similarly to a digital overdraft, and you only pay for what you use.  

A line of credit facility can be a good option for SMEs who need working capital of €50,000 to €250,000 annually. 

Here’s the eligibility for a line of credit facility with Financefair: 

  • Incorporated limited company in Ireland
  • Trading for at least 1 year
  • Minimum annual turnover of €300,000

Many banks can offer you a line of credit, but you usually have to have been banking with them for a certain amount of time. 

The main benefit of a line of credit is quick access to working capital. Once we’ve set you up on our platform, you can initiate a transfer when you need an injection of capital and receive funds in your bank account in 24 hours. 

This is a more flexible funding option than more traditional funding, like a bank loan. A line of credit is a revolving source of working capital. Once you’ve paid what you owe, you have access to that funding again without having to reapply. 

Financefair is the only provider of a standalone line of credit in Ireland.

With a business line of credit, you’ll pay a platform fee and a monthly fee of 0.6-0.75%, minus any discounts for a strong credit score.  

For more information, read our online business line of credit guide

Three questions to ask yourself when deciding on a working capital financing solution 

When deciding on a facility, use these three questions to help you decide which type of working capital financing solution would work best for your company:

1. What are my cash flow requirements? 

Consider your cash flow requirements: 

  • If your revenue fluctuates with the seasons, revenue based finance might be a great solution for your business. This option ties repayments to your revenue, reducing the risk of overborrowing during slower periods.
  • If you’re experiencing a cash flow squeeze each month while waiting on invoice payments, selective invoice finance can provide up to 90% of an invoice’s value upfront, offering a quick capital boost.

2. How often do I need access to working capital? 

Consider how often you’ll need funding. Bank loans provide a predictable monthly expense and low-interest rates but lack flexibility if you need additional funds. On the other hand, solutions like revenue-based finance and line of credit offer a revolving line of funding, so you’ll always have access to working capital without having to reapply. 

3. Do I have any tangible assets or collateral? 

Traditional bank loans are based on businesses with tangible assets and collateral. If you’re a SaaS business that raises revenue from subscriptions, for example, you’ll find it difficult to get funding from a bank.

Thankfully, many innovative solutions are available that don’t require collateral or tangible assets, such as revenue-based finance, invoice finance, and a line of credit. Moreover, most lenders require a personal guarantee, which puts your personal assets at risk if the business fails. At Financefair, we don’t require personal guarantees on any of our facilities.
 
Read on for three examples of working capital financing strategies for SaaS, e-commerce, and recruitment businesses. 

How a SaaS company used revenue based finance to support their working capital financing strategy 

It’s rare for banks to lend to SaaS businesses, as they lack tangible assets and collateral. Thankfully, there are better options for accessing flexible working capital that work well with a SaaS model.  

At Financefair, we work with a lot of growing SaaS companies. We often recommend revenue based financing.

Revenue based financing is ideal for SaaS businesses with strong revenue streams but few tangible assets. Because payments align with your business revenue, there is no risk of overborrowing. Likewise, there’s no equity dilution, so you can maintain control of your business. 

We recently worked with a business that retrofits commercial vehicles with dashcams and offers comprehensive software for data analysis, working through a SaaS model.

The business approached Financefair, as they needed to secure working capital. They wanted to secure €4 million from investors to venture into new markets. However, they wanted to avoid diluting their ownership too much.

After discussing their situation and ambitions with our experts, the business decided on a revenue-based finance facility, which offers fast access to working capital without giving up equity. 

We could extend them a revolving funding line of €1.5 million. Based on their business forecasts and needs, we disbursed an initial capital injection and distributed the rest in stages. 

With a steady stream of working capital, the company was able to delay its search for investment by 12 months.

This allowed them the time to refine their funding strategy and reduce the size of the investment needed, thus keeping more of their business when they did find an investor. 

Read more about how we can support your SaaS business: SaaS financing: What you need to know 

How a recruitment business could use invoice financing to alleviate a cash flow gap

Many recruitment businesses experience cash flow pinches. You pay your contractors, but you have to wait at least a month or two for the contract owner to pay you. 

Invoice financing works well for a recruitment business to alleviate that cash flow pinch and access working capital. At Financefair, we offer both selective and full-book invoice financing. These facilities are a great option for hybrid or temp recruitment businesses with a high volume of invoicing.

Invoice financing allows your business to get paid for your raised invoices in 24 hours rather than waiting 30, 60, or 90 days to receive funds. 

This gives you the peace of mind that you have the working capital you need to get through a cash flow pinch. 

Imagine a recruitment agency specialising in providing temporary staffing solutions. This agency faces a common challenge: they pay their contractors every week but must navigate a long waiting period before their clients settle invoices and the business gets paid. 

This leaves the recruitment company with a cash flow gap that can disrupt operations and cause financial stress.

To alleviate this cash flow pinch, the recruitment business could turn to selective invoice financing. This allows them to choose high-value invoices and get an advance of up to 90% on them. 

Here’s how it works:

  • The recruitment business earmarks a high-value invoice, say for €60,000, with payment terms of 60 days.
  • The business raises this invoice on the Financefair platform and receives 90% of the invoice’s value in their bank account (€54,000) in 24 hours. 
  • This rapid injection of capital alleviates the cashflow bottleneck and also enables the business to take advantage of new opportunities and tender for new contracts. 

To learn more about your working capital financing options as a recruitment business, read our guide: Recruitment financing: How can you alleviate cash flow pinches? 

How an ecommerce business can use revenue based finance to grow their business

If you’re an ecommerce business, you’ve probably considered taking out a bank loan to use as working capital, perhaps to help with inventory management.

While you may have tangible assets to use as collateral for a loan, this type of financing lacks flexibility. Once the funds from the loan are gone, you’d have to re-apply to the bank to get another dose of working capital. Most banks are unlikely to offer you a second loan, and you can lack the working capital you need to manage and grow your business. 

At Financefair, we’ve helped many ecommerce businesses use revenue-based finance to access a revolving line of funds that act as fast injections of working capital. 

Consider an e-commerce business operating through Shopify, looking to scale operations and expand its market reach. This business, already showing promising growth with over €1m in annual turnover, is looking for a flexible financing solution to support its ambitions without diluting ownership or taking on restrictive debt.

Imagine that this company has applied to Financefair and passes on its sales data and growth projections. After getting back to the company (within 24 hours), we were able to set up a revenue-based financing facility within the week.

We could loan the company 20% of their future annual recurring revenue. There was an initial injection of capital, and then we strategically dispersed the rest of the funds throughout the year. After receiving funding (24 hours after setting up the facility), the company was able to put the capital to work by: 

  • Making inventory levels and improving supply chain: Utilising discounts for bulk inventory purchases to improve margins and investing in a more cost-efficient supply chain. 
  • Filling cash flow gaps: Smoothly managing operational expenses during periods of fluctuating sales.Ensuring timely payroll and contractor payments 
  • Amplifying digital marketing efforts, including SEO, social media, and pay-per-click advertising, to drive sales and expand the customer base.

Revenue based finance could be an invaluable growth tool for this ecommerce business. It can provide the liquidity they need to scale, without having or taking on long-term debt or giving up equity. 

Are you an ecommerce business looking for working capital to improve your day-to-day operations and grow? Read more here: Ecommerce financing: What are your options? 

Why choose Financefair for your working capital needs? 

Financefair (formerly InvoiceFair) was founded in 2015 in Dublin. Our team of experienced industry experts offers tailored working capital solutions to grow your business. 

We’ve been helping Irish SMEs grow with invoice finance, revenue based financing and business line of credit facilities. 

Here’s what you get with Financefair:

We’ll give you an indicative offer within 24 hours of applying

Our streamlined processes and expert team allow us to give you an indicative offer in just 24 hours. 

And once your application is approved and you’re set up on our platform, we can release your funds within 24 hours. 

We use advanced data analytics to get read-only access to your most recent accounting and open banking information. This gives us an accurate and real-time view of your business finances so we can offer you the best facility for your current needs. 

Access more working capital, thanks to our unique funding model

The funding a traditional bank can offer comes directly from its balance sheet. We work differently. We partner with a number of investors who advance the funding. This allows you to get a larger overall working capital funding. 

Bank loans also come with strict concentration and risk rules. Many banks don’t want to provide additional financing to a business that already has a credit line with them, making it challenging to access more funding on top of your existing loan.

Because we offer flexible working capital financing solutions, we can tailor your facility as needed and offer you more funding as your company grows – without you having to re-apply.  

Apply digitally for a seamless end-to-end experience, or reach out to our team 

We understand the importance of making funding as accessible as possible. That’s why you can start your journey with Financefair in under 5 minutes by completing our application form

Of course, if you’d prefer to speak to our expert team, you can always contact us to discuss how we can grow your business. 

Financefair is the only provider of revenue based finance, selective invoice financing, and a standalone business line of credit facility in Ireland. 

Here are some other benefits of choosing Financefair: 

  • You can easily swap facilities: You might start out with a business line of credit and want to switch to revenue-based finance as your revenue increases. This is a simple process at Financefair. 
  • You don’t need blue-chip debtors or tangible assets: At Financefair, we look at the strength of your revenue: we don’t need you to have tangible assets or blue-chip debtors. 
  • We don’t require a personal guarantee from the business owner, so your personal assets, like your home, are never at risk. 
  • Our pricing is simple: there are no hidden fees or costs.

Choose Financefair to support your working capital financing strategies 

At Financefair, we pride ourselves on offering tailored working capital solutions to ambitious Irish SMEs. 

By using our innovative financing methods – like revenue based finance, line of credit, and invoice financing – you can access a source of working capital without burdening your business with debt, or diluting equity. 

To get started with Financefair, complete an application form. Alternatively, reach out to our team of experts to discuss your options. 

 

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