A recent report by the British Business Bank highlighted that external finance remains a vital resource for small businesses as they navigate through uncertain times. The same report also showed how those businesses that secure external funding are more likely to innovate in their markets.The Small Business Finance Markets Report of 22/23 looks at the relationship between finance and innovation in the small business landscape. It identifies innovation as central to the long-term growth of the UK SME segment and recognise that it often requires external funding. The report also demonstrates the impact external funding can have on growth, with the report citing the fact that 66% of SMEs innovators use finance, compared to 58% of all companies.Innovation can be thought of as having two facets. The first is market-facing and can be broadly defined as creating a new product, service, or technology for customer adoption. The second is about internal, or business innovation, where companies implement new processes, ideas and operational rhythms with the goal of boosting the bottom line.I have long-believed that finance can be a real accelerator for businesses with significant growth aspirations. I have seen first-hand the transformative impact external funding can have on businesses at the beginning of a growth arc.Many firms though, feel reluctant to look at third-party funding, preferring instead to wait until the cash reserves are large enough to cover the necessary outlay. Whilst this may be a sensible route for some businesses, owners should think long and hard about whether it’s the right option for them. In my experience, there are a few key reasons that the ‘hold and wait’ position may not be viable for growth.\t\t \t\t\t1. Most businesses don’t have the spare income to make their plans a reality.\t\t \t\tWhen rent, staff costs, accounting, stock, and equipment are all considered, it’s no wonder so many small businesses struggle to fund the ‘nice to haves’. Your usual operational costs are essentials, but innovation demands some extra investment.Keeping cash flow healthy is a major priority for British small business owners, with our most recent Business Confidence Survey finding 40% are kept awake at night by it. This doesn’t leave much room for spare capital, so businesses need to find alternative ways to secure it.\t\t \t\t\t2. Your competition is likely to be seeking investment, even if you aren’t.\t\t \t\tNo one really knows exactly what their rivals are up to, but our survey tells us that 65% of SMEs believe they might require external finance for a range of different reasons. If you’re one of the 35% that isn’t, you could find your business falling behind.\t\t \t\t\t3. It takes money to make money.\t\t \t\tThe equipment and assets you need to grow certainly don’t come free, but that doesn’t mean they’re not worth it. The biggest global business brands are renowned for their constant investment to keep ahead of their competitors. Amazon, for example, put a huge amount of investment into developing same-day delivery because they knew their rivals were focusing on it. They couldn’t stand still on something that would be so important to their customers. No matter what their size, every business should invest time and money in whatever will propel it forwards.\t\t \t\t\t4. Your industry won’t stand still\t\t \t\tCustomer needs change, and it’s up to businesses to predict and meet those needs. As long as you’re aware of the changes taking place in your sector – and what your current and future customer base needs from you – you can keep ahead of the curve and prevent market attrition.For some businesses, the transformative impact of innovation can be unlocked by securing external finance. But the provision of finance itself has been transformed by innovation. Alternative finance providers, fintech solutions and equity crowd-funding, for example, have fundamentally shifted the traditional business banking model – and that’s good news for SMEs.Today, securing funding for your business can be a lot quicker and easier than you might think. We’re delighted to serve the UK’s vibrant SME economy and will continue to innovate to meet its needs.At Capify we offer a range of business loans to help support small businesses throughout their growth journey. Check to see if you’re eligible for one of our loans with our online eligibility checker. Or, if you’d prefer to talk to a member of our team, we’d be happy to guide you through the process. Give us a call today on 0800 151 0980.