Finance a barrier to growth for family businesses

September 15th, 2014

Family businesses are currently struggling to secure external funding, KPMG says.

Having adequate levels of funding for investments is essential to small business growth. However, a new global study from KPMG suggests that a large proportion of family-owned businesses are struggling to secure the necessary finance.

According to the consulting firm's survey, well over half (58 per cent) of family businesses said they are experiencing trouble finding external sources of funding to drive investment and growth. Specifically, respondents pointed to the difficulties involved in seeking the appropriate "strategic investment partner".

This may be a concern to both Australia and the worldwide economy, as data from the Family Firm Institute reveals that these businesses contribute at least 70 per cent of global GDP.

As KPMG's report outlines, the main investment avenues available today may simply not be feasible for small or family businesses to take. Private equity funding, for example, usually requires the selling of the entire business to secure the best long-term value.

With such limited options for external financing, just what routes can family business owners take to obtain the funds they need to support expansion?

KPMG suggested that seeking the involvement of high-net-worth individuals, or HNWIs, may be one "possibly underutilised route for investment", with these people often having access to substantial investment capital and empathising with family businesses.

Securing the assistance of such sources may still be a challenge, however, and not particularly practical when your cash flow finance is running perilously dry. For times when you need a quick injection of cash to pay your necessary expenses and allow you to focus on growth, debtor finance may be a viable option.

By turning the unsettled invoices you have into direct cash you can instantly start using to drive growth and cover a variety of costs in your business and you won't have to worry about going through layers of red tape to secure the timely funding you need.

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