Accelerate business growth through alternative funding

27 July 2015

Business success for cleaning companies calls for appropriate financial support, but what happens if the bank says ‘no’? Mike Nolan, managing director at Academy Leasing, looks at the alternative funding options available to help accelerate business growth and expansion.

For the cleaning sector, a future of growth and expansion looks promising following the economic downturn. The facilities management market is expected to reach a forecasted £23.2 billion by 2018, while total industry sales in the contract cleaning market is expected to rise by more than £700 million in 2019. 

However, while the outlook looks bright, it still remains difficult for business owners to gain funding from the banks and securing appropriate finance to support investment in growth remains a challenging hurdle for cleaning companies. Together with competitive pricing and tighter industry margins, this has meant cash flow is being stretched to breaking point, forcing business owners to keep a tight rein on finances and curb any hope for business progression. If the banks do say ‘no’, though, four alternative options are available. 

1. Lease don’t buy

To stay ahead of the competition and become more business efficient, continual investment in new, yet costly, equipment and technology, such as scrubber dryers, large ride on sweepers or escalator cleaners, is necessary. Rather than buying the items upfront, leasing equipment enables the cost to be spread over a three or five-year period through regular monthly payments, allowing money to be retained in the company cash flow. 


Using a funder who already has experience and direct working knowledge of the cleaning industry can make the whole process much easier than obtaining a loan from a bank. A lender with sector experience will be more aware of the return on investment the latest equipment can generate and therefore more likely to provide funding approval on the back of its potential than a bank without the inside info. In some instances, the borrower may not have to make a payment until after the equipment has been put in place, allowing them to immediately reap the rewards from greater revenue streams.

2. Borrow against your existing assets

If you have a business critical customer who provides a large proportion of your revenue but they are regularly late with payments, cash flow could be left at breaking point. In such cases, your existing hard assets, such as scrubber dryers, can be borrowed against to release working capital. If the asset finance specialist believes your debt can be adequately serviced, they may not deem further securities (such as personal guarantees against the business owner’s home) as necessary and even if the balance cannot be finally settled, the company will be given the chance to sell the equipment itself, ensuring a fair and acceptable price is received. 

Equipment which is still subject to existing finance terms can also be used. In this instance, the financier can lend money to spread the payments over a longer term, reducing monthly outgoings and providing more financial flexibility. 

3. Plug the invoice payment gap

Unpaid invoices can be problematic for all businesses, big or small. Pressures to manage your cash flow while chasing outstanding debts can be stressful and can leave you unable to pay necessities, like staff wages. Here, factoring or invoice discounting can help. Invoice factoring is a completely outsourced credit control and collection service. The financier will take over managing your accounts and will chase clients on your behalf to settle payments. 

With invoice discounting, a financier will lend money against the unpaid invoices but will still expect your business to maintain responsibility for payment chasing, credit control and invoice processing. Both services will cost the business an agreed fee but will not require the personal guarantees demanded by the banks. 


4. Borrow to fund a takeover

Expansion by acquisition can help increase your company’s market share quickly, allowing the business to grow rapidly in a competitive industry. Once again, your company’s hard assets (like equipment) may represent the best option to raise the requisite funds for a buy-out. The process is two-fold: the purchasing company must first find the finance to fund the acquisition and secondly secure sufficient working capital for the day-to-day running.