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Cashflow Loans for small businesses

Published on 20th August 2019

For any business to succeed, there needs to be a healthy cash flow on which to build upon. But if you’re an SME, achieving and maintaining your cash flow can feel like quite an endeavour. As you continue to grow and develop your venture, you’re bound to encounter issues that may affect your ability to generate a reliable revenue each month. Although it can be a daunting period for any business owner, you don’t need to confront it alone. Thanks to the Alternative Finance industry, there are a number of finance solutions available that could help. So if you're an SME owner and having trouble managing your cash flow now, or in the near future, here’s what you need to know.

Why is managing my business’ cash flow so important?

No matter your size or sector, maintaining a reliable cash flow each month is vital for your business’ survival. It directly affects your ability to maintain day-to-day operations, replenish supplies, pay staff, resolve utility bills, replace ageing equipment or even support key growth projects. As such, cash flow is the lifeblood of your business and maintaining it needs to be one of your top priorities if it isn’t already. That’s why, if your business enters a period of sustained cashflow difficulty or you expect to do so in the near future, taking action sooner rather than later may help you to avoid insolvency and any other long-term issues which may result.

Having trouble managing your business’ cash flow? Need help sourcing an appropriate finance solution? Apply for Cashflow Finance and learn more about how your business could benefit

What can cause reduced cash flow?

Despite cash flow being a vital aspect of maintaining any business, even the most well-established businesses can find themselves facing difficulty in this area, sometimes through no fault of their own. Although there are many reasons why a business may have uneven cash flow, some of the most common reasons usually involve late payments, premises rent increases, customer trends, a rise in supplier costs, natural disasters, local economy, damaged equipment and unexpected payment demands. But in order to begin tackling the issue, you need to pinpoint the precise cause(s) of your current cash flow situation, which will enable you to identify the most suitable solution.

What finance solutions are available to help me manage cash flow?

If you’re having a difficult time maintaining your business’ cash flow, applying for Cashflow Finance could prove an invaluable tool, granting you the means to target the sole cause(s) and keep your business afloat. What enables Cashflow Finance to provide this support is that it allows you access to a variety of business finance solutions, such as Overdraft Replacement, Merchant Cash Advance, Invoice Finance, and Asset Refinance.

Overdraft Replacement

For many SMEs who are in need of emergency funding, Overdraft Replacement can be a great way of getting access to quick cash. This is because an Overdraft Replacement offers your business a Line-of-Credit, which gives you instant access to an allowance after an agreement has been established (which depending on the complexity of the request could be established in as little as 48 hours). This allowance is based upon your business’ previous income, plus you’re also under no obligation to draw down any of the funds that are made available to you. However, interest will be charged on anything that you do use and the balance will need to be repaid within 30-90 days, depending on the agreement. Once this has been repaid, you’ll regain access to the allowance and will be able to withdraw and repay funds on a revolving cycle.

Merchant Cash Advance

Meanwhile, if you’re looking for another way of generating quick cash for your business, you could apply for a Merchant Cash Advance. Not considered a loan product, Merchant Cash Advance enables you to receive an advance based upon your business’ card-based (credit and debit card) revenue. As such, you must have the capacity to accept card payments and be able to present lenders with 3 or more of your latest consecutive sales report. Using this, lenders will be able to calculate your business’ average card-based sales in one month. So if your business usually earns around £35,000 in card sales, you could receive an advance in the same region, if necessary. Although Merchant Cash Advance is technically an unsecured finance product (meaning you do not have to use an asset as security to back up your application), little attention is given to your credit score. Plus, a Merchant Cash Advance also uses a Flexible Monthly Repayment Scheme that allows lenders to automatically intercept an agreed percentage from each of your card sales until the agreement has been fully repaid, plus interest.

Invoice Finance

On the other hand, if you need fast access to cash, you could release up to 90% of the capital locked within any unpaid Business-to-Business (B2B) invoice by applying for Invoice Finance. A secured product which uses the unpaid invoice as security, it also possesses no maximum credit limit other than what the lender is willing, or able, to provide, depending on the type of product you choose and the value of your invoice/s. Most commonly, Invoice Finance arrives in two forms: Factoring and Discounting.

  • Factoring: this could be a useful solution for your business if you’re able to generate an annual turn over of no less than £25,000. You also need to maintain up-to-date business ledgers and have the capacity to exercise successful credit control procedures. But, you do have the option of passing credit control duties on to the lender who will pursue the debt on your behalf whilst exercising discretion, saving you time. Once the debtor has fully repaid what they owe, the lender will make a balance available to your business. This will be the remaining amount of the invoice (e.g. the remaining 10%) minus interest and service fees. Plus, it’s also worth noting that some providers offer Bad Debt Protection as standard, protecting your business should the debtor fail to repay what they owe.
  • Discounting: on the other hand, Discounting requires your business to generate an annual turnover of at least £100,000. You’ll also need to ensure that ledgers are all up-to-date and that you’re able to carry out successful credit control procedures. However, another key difference between Factoring and Discounting is that, with this option, the debtor pays directly into a lender-controlled facility, rather than your business. Nevertheless, when the debtor has fully resolved what they owe, the lender will once again release a balance to your business, minus interest and service fees.

Asset Refinance  

Finally, if you own any unencumbered assets (equipment, machinery or vehicles) that aren’t fixed into the structure of your premises, applying for Asset Refinance could enable you to release up to 100% of the equity they contain in order to generate a lump sum. This lump sum is also not subject to any usage restriction or credit limits other than what the lender is willing, or able, to provide. In addition, this finance solution also offers terms lasting up to 5 years, during which you are required to make Fixed Monthly Repayments, plus interest. Although this is a useful way of generating funds, you need to be aware that Asset Refinance is a form of secured asset-based lending. Therefore, if your business falls behind in the repayment scheme and defaults, the lender may gain the right to repossess these assets.

Need help supporting your small business’ cash flow?

As well as supporting growth and running day-to-day operations, maintaining your business’ cash flow needs to be a priority. However, when running a developing SME business, access to capital may be limited. This could prove a difficult challenge to overcome, especially if you run into any issues with your cash flow. However, rather than deplete your savings or allow the situation to develop into something much worse, applying for Cashflow Finance could be the answer. All you need to do is source an agreement that’s suitable for your business, which can be just as much a challenge in itself. Fortunately, you need to do so alone.

At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. So if you need help managing your business’ cash flow, apply for Cashflow Finance today or find out more with Rangewell.

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