When your business is experiencing cash flow issues, it may feel like there are limited options. Understanding what funding solutions are available can help you get ahead of the crisis and prevent it becoming a serious problem.
What causes cash flow issues?
A cash flow shortage can be the result of many different factors. Particularly for small and medium sized businesses, one or two issues with late payments from customers or a downturn in sales can quickly mount up. As you draw resources from wherever you can to support challenging business conditions, this can leave the business facing much greater financial strain.
Be prepared and understand your options
Whether you are experiencing cash flow concerns or not, understanding your options regarding funding means that you can respond quickly and make an informed decision if and when the need arises.
Halo Corporate Finance are experts in helping businesses with cash flow solutions. We have put together five of the most helpful funding options that you may want to consider in a cash flow shortage scenario:
- Invoice Financing
Invoice finance allows you to release up to 90% of the value of an invoice within 24 hours of its issue.
Over 10% of invoices owed to SMEs are paid late, and these businesses spend an average of 15 days a year chasing payment on outstanding invoices.
Invoice finance is an efficient way to bridge the gap that late payments cause, and optionally allows you to reduce overheads and improve collection times if you make use of the lender’s debt management service.
- Spot Factoring
Like invoice finance, spot factoring (or single invoice factoring) can allow you to release up to 90% of an invoice’s value within 24 hours of its issue. However, instead of providing funding against your whole sales ledger, spot factoring allows you to release cash from a single invoice at a time.
This option allows you access to the cash tied up in selected unpaid invoices without requiring you to sign up to a long-term funding facility. It’s a particularly good option for high value invoices or those with long payment terms.
- Asset Finance
If your business needs to purchase a new asset – either machinery, tech equipment, stock or even software, or even if you have already invested in such assets, you may find that asset finance is a good option to release funds.
For the purchase of new equipment, a hire purchase agreement involves the lender buying the asset you require and leasing it back to you in return for regular payments, with the option for you to buy the asset at the end of the lease.
Similarly, a finance lease involves the lender buying the asset and leasing it back to you, but at the end of the contract the company will sell the asset, and you may benefit from a share of the proceeds.
If you already have money tied up in assets that you own, you may want to consider refinancing them. This involves selling your asset to a finance provider and leasing it back from them in return for a fixed number of repayments.
All these options can help you manage your cash flow with fixed monthly payments and can also protect your company from asset depreciation as you don’t own the asset on your own balance sheet.
Although there are many alternative funding options today, traditional business loans are still a great way to raise working capital or fund growth. You may however be surprised to learn that loans aren’t only available from your business’ bank. Many lenders offer better credit terms and much shorter turnaround time for applications. Our experts at Halo Corporate Finance can advise you as to the best options for your business.
- Peer-to-Peer lending
If you haven’t heard of peer-to-peer, or P2P lending, read this article to understand more about this increasingly popular alternative to traditional bank lending.
In a nutshell, peer-to-peer lending allows businesses to borrow money from private investors. To secure this type of funding, you must usually have a good credit rating and typically at least two years trading history, as this lessens the risk to potential investors. If you meet these criteria, peer-to-peer funding is typically easier and faster to secure than traditional bank loans and comes with more competitive interest rates, as investors will bid against each other to win your custom.
Finding the right options for you
Getting the right funding for your business is not only about securing cash flow. It can allow you the chance to take advantage of growth opportunities, help you to obtain discounts from suppliers and purchase the assets you need to grow.
If you would like any more information on any of the solutions above, or if you have an alternative in mind, our team of independent experts can help discuss your options.
Contact Halo today on 0345 450 1966 or request a call back to see how we could help your business.