Flexible funding – Why and when it matters
Why and when it matters
Access to the right type of funding at the right time can be critical for growing businesses. Many SMEs find that traditional funding approaches - such as long-term loans or asset-based lending (ABL) - do not align with their evolving needs. These solutions are often structured from a lenders perspective or can have rigid terms, strict eligibility requirements, and even lead a business’s funding being restricted.
Flexible funding solutions can offer a better alternative, especially for small to medium-sized companies (SMEs) that need to plug the gaps in their cash flow as they manage production, inventory, and invoicing cycles.
The limitations of traditional finance
Traditional term loans typically provide one lump sum with fixed repayment schedules. While this model can be useful for funding large, one-off investments such as equipment purchases, it rarely fits the fluid, day-to-day capital requirements of a growing SME. Similarly, ABL solutions - although designed to offer more flexibility - can come with heavy administrative burdens. Businesses are required to place fixed specific legal charges over their assets and route payments through control accounts. In many cases, funding is tied to historical performance or credit criteria, which may not reflect current trading potential.
This mismatch between funding structure and operational reality can restrict business agility, especially for SMEs in sectors with complex working capital cycles, such as manufacturing, logistics, engineering, and distribution.
Why flexibility matters
Flexible funding solutions are designed to address this mismatch. Instead of locking businesses into fixed terms, they adapt to changing operational requirements, enabling businesses to borrow based on current needs. Instead of a one-size-fits-all loan, a tailored funding solution allows businesses to access capital when they need it, and in amounts that reflect their specific situation. This helps preserve liquidity as well as improve operational efficiency. For example, a ThinCat’s Agile Capital is an example of this new generation of funding solution. It combines the strengths of term lending with the flexibility of a revolving credit facility (RCF) allowing businesses to borrow against receivables and stock on a rolling basis. As trade increases, so does the available credit - providing liquidity when it is needed, enabling businesses to access capital based on their working capital position. Unlike traditional ABLs, Agile Capital does not require fixed legal charges over specific assets or the use of control accounts, significantly reducing the administrative burden. The term loan element is then utilised for longer term investments or requirements.
Simple monthly monitoring of trade debtors and inventory ensures that borrowing capacity scales with the business. This flexibility empowers SMEs to fund growth, manage seasonality, and navigate supply chain challenges without being tied to rigid loan structures.
Key benefits of flexible funding:
- Improved cash flow management: Borrowing against receivables and inventory helps smooth payment gaps without over-leveraging.
- Lighter administrative burden: No need to provide specific asset fixed legal charges or use third-party payment accounts.
- Adaptability and agility: Funding adjusts with business activity, not historical data.
- Greater accessibility: Supports growing businesses that might not qualify for traditional finance.
Funding that works with your business
Flexible funding offers a tailored, scalable alternative to traditional loans. It provides the agility SMEs need to take control of their cash flow, respond to market changes, and unlock growth opportunities as they arise.
Ultimately, it’s about ensuring your finance solution – and your funding partner - work with your business, and not the other way around.