FAST GROWTH CAN BRING EVEN FASTER PROBLEMS!
In the last 40 or so years I’ve seen thousands of businesses, many of them with financing problems. I have made my living by helping businesses with problems find financing.
One common problem is high growth. Businesses that grow too fast often run out of working capital to sustain their growth and even though they are profitable, run out of cash to fuel the additional assets they are building. Their lines of credit ascend far above what traditional banking will provide and they must go elsewhere to get the money they need to stay in business. This problem can often be solved by accounts receivable financing and factoring, but it is more expensive than traditional financing. If managed properly though, it can solve the business’s problem. I am a specialist in this kind of financing and it has worked for many of my clients.
The other problem with fast growth is managing what the business already has, its assets and production. Rapid growth may spawn sloppy products, slow delivery of shipments and generally mass confusion. To be successful controls over all the processes and products must be in place in order to support new growth in business. If one can’t manage what they have more won’t be easier!
If this isn’t clear, just witness what is going on in government! High growth of programs has led to IRS not being managed properly, questionable practices at NSA, entitlement program frauds, rapidly increased spending on programs that aren’t working, and many other issues as well. Oh, and they are funding all of this with debt too. The solution of raising taxes is similar to banks asking owners to put more money into their struggling business, which the owners may or may not have available. That is where the higher rate accounts receivable lenders come in for businesses.
Government sells bonds to finance operations. The US government sets its own rates, contrary to banks pricing them for businesses. I wonder how long this can continue? I wonder if they will figure out how to manage what they have before growing even more? I wonder if they can learn from businesses?
Just thinking……….
