Funding tip for August - Plan your funding further ahead

2022 has been a difficult year for growth companies. Over the last 6 years or so, companies have become accustomed to the availability of a lot of low-cost debt and equity finance. Loss-making growth has been financed and valuations of growth companies have been high. Now the world has changed; loss-making growth companies are no longer willing to be financed to the same extent as before, as in a world of rising interest rates it is profitable growth that is most valued.

What should companies take into account in a changing market situation?

Companies must now strive to make their business profitable and cash-flow positive as quickly as possible. In the past, in the days of 'loose money', this was not so critical. So the rate of growth of businesses will slow down as they have to look for profitability rather than just growth.

However, please note that there is still a lot of funding and different types of grant funding available for projects and businesses related to green transition and social responsibility.

Tips for the changed market situation:

1. Prepare for a world of slower growth and tighter funding markets

2. Secure funding for the next 2-3 years ahead

3. Be prepared for a much longer time to apply for funding: whereas it used to take 6 months to apply for equity and other funding, it is now a good idea to allow 12 months for the process.

4. Note that the focus has shifted from growth to profitability and positive cash flow. This should take into account cost levels and possible cutbacks, where speed is of the essence, as investors/financiers value the ability to quickly adapt the business to a changed world.

5. Consider the impact of inflation on your business model and the potential for price increases

If you would like to discuss about financing for your company or portfolio company, please feel free to contact our experts. You can find our team's contact details here.

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