What is Cashflow Finance?

Cashflow finance can help SMEs grow and expand

Is cashflow becoming an issue? Need additional support during slow trading periods? As fun and enjoyable as running a business can be, it’s also a big responsibility. You always need to be prepared for any potential issues that could negatively affect your cash flow, from an unexpected bill or equipment malfunction to simply scaling up. So if you’re worried about your business’ cashflow, Cashflow Finance could be the answer you need. This is a collective term used to describe a variety of specialised finance products that include, but aren’t limited to:

  • Merchant Cash Advance
  • Invoice Finance
  • Bridging Loans

What is Cashflow Finance?

Running a successful business can be a challenge and most UK sectors may experience seasonal trading highs and lows. Ensuring a strong cashflow is a task on every business owner’s mind, and we all know that without a constant flow of customer revenue business suffers. This is exactly why Cash Flow Finance is so invaluable. With a tailor-made solution adapted to your unique situation, your business can receive the support it needs to prosper, even through the most challenging of times. Although approval criteria can differ from product to product, your business must possess a trading history of at least 2 years and be requesting a sum in excess of £5,000 to qualify. In addition, you must also provide any relevant documentation which will allow lenders to assess whether your business can afford the products they’re offering. That’s why, before pursuing any financial commitments, it’s crucial that you fully understand the solutions available to your business with Cash Flow Finance.

Is cash flow becoming an issue in your business? Learn more about working Capital Finance or apply today

Merchant Cash Advance

A Merchant Cash Advance is a unique way of acquiring an advance for your business, often in as little as 48 hours of applying. When applying for an advance, lenders will ask to review your latest card sales reports for 3 or more consecutive months. Your sales reports are made up of your card processing statements and bank statements. Providing these is vital as your card sales will determine the size of the advance, the repayment scheme and whether you can afford an advance in the first place. Because this product relies heavily on your credit and debit card transactions, your business must be able to support card-based transactions to qualify.

If agreed by the lender, the lump sum will be worked out as an average of your submitted sales reports. As such, if your business earns roughly £5,000 each month, the size of the advance will be in the same region. The advance can be used to support any area of your business, including a cashflow injection, support for business projects, to pay for professional services or to cover unforeseen emergencies.

Repayment of an advance is carried out through a Flexible Monthly Repayment scheme that operates around your card sales. During the discussion phase with a lender, you will be offered a Holdback, or Retrieval Rate, allowing lenders to automatically claim an agreed percentage of your upcoming monthly card sales. So, for example, if you’re offered a rate of 18, it means 18p from every £1 your card customers spend will go to repay the lender. This means that your business’ existing capital is left intact and the repayment scheme doesn’t remove more than you can afford.

Invoice Finance

Invoice Finance lets you access money held in unpaid invoices that your business may have accumulated. It’s a great means of providing support, acquiring cash fast and supporting any of your business projects. So, if you’re a business owner with outstanding invoices, or regularly work around them, Invoice Finance can be invaluable. But when considering this method of finance for your business, it’s essential for you to understand the two types on offer and how they work:

  • Invoice Factoring: lets you borrow a lump sum equivalent to around 90% of an outstanding invoice’s overall value. By choosing this option you assume the role of the credit controller, ensuring that payment owed by the customer in question is forthcoming. Until you’ve received full payment, or begin taking regular instalments, you won’t be required to begin the fixed monthly repayment process, plus interest. That said, lenders may specify a cut-off period stating exactly how long they’re prepared to wait. Should this period expire, the lender will begin the repayment process, regardless of whether or not you’ve been paid.
  • Invoice Discounting: again, allows you to borrow up to 90% of an outstanding invoice’s total worth, however, with this option the customer responsible for the invoice will, instead, pay the sum owed directly to your lender. You also have the option of making yourself the credit controller or making use of the lender’s ledger service, if one is available. Once the lender has received full payment from your customer, they will make a balance available to your business. This will be the remaining amount owed to your business by the debtor, minus any fees and service costs.

Bridging Loans

Bridging Loans are short-term products that are typically secured against assets such as residential and commercial properties. They can be used to access quick cash, fund refurbishments and aid property developments, and can also be used to bridge the gap between other finance products. In addition, acquisition of the funds can be fast, in as little as 48 hours in some cases.  

To qualify for a Bridging Loan, you must be the owner of the work premises, residential property or be a homeowner. This is because the product is Secured and requires you to provide collateral should your business fail to repay the product. You may also be required to pay arrangement fees, surveyor fees and an exit fee. In addition, lenders will request to review your credit score and business history, including that of any associated directors. If you possess strong assets, can set out a clear exit strategy and show that your business can afford the product, a Bridging Loan may be a great funding option for you.

Sourcing the right solution for your business

Sourcing the right type of finance for your business can be difficult. With so much to consider and with so little time, it boils down to what you value most in a finance agreement.

You want a product that supports your business, giving you the breathing space to function or grow. And of course, you want a product that gives you great value for your money, with a desirable interest rate to match. That’s why it’s important to find a finance product that’s both appropriate and affordable, allowing you to get on with growing your business without any additional stress. By searching and applying for business finance through Rangewell, you can ensure your finance fits your business. You can apply now or contact one of our finance experts today to discuss your options.

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