Helping a nursery stay in business with £20,000 Cashflow FundingPublished on 2nd December 2019 2019-12-02T12:00:00+00:00
If your clients include children’s nursery owners, you will know the financial challenges they face. There are market restrictions on what they can charge per child, and overheads are high.
You may advise a small nursery to grow its numbers as the best route for profitability, but many parents - and children, and probably staff - may prefer a smaller facility with a friendly atmosphere. They will actively seek out a small nursery.
It can mean that cashflow is tight - even for successful nursery businesses.
We recently helped an accountant find a solution for a nursery operator who faced a cashflow problem - and which kept recurring, despite all she could do to keep costs under control.
The accountant’s client ran a small nursery serving a bustling commuter town and had small premises close to the railway station - an ideal position for parents dropping off their children before heading off to work. The nursery was full to capacity, and the business was doing well - but there was a problem with cashflow that the accountant noticed occurred regularly in June and August and just after Christmas each year.
“My client’s takings took a downturn twice a year. I asked her what was happening, and she explained that those were the times when she found she had empty places. Family holidays and Christmas breaks meant that her takings were down - and her cashflow was so tight, she found herself not bringing in enough income to cope with the outgoings.”
The premises were expensive, with rent and business rates to pay for, but the main cost was that of staff.
“The staff numbers my client needed are laid down in the rules and regulations she must work to. She can’t let staff go when children don’t come in - because she will need them again as soon as the numbers are back up.
I needed to help her find some kind of cashflow support finance - so I called Rangewell.“
At Rangewell we work closely with accountants and other financial advisors to find the solutions their clients need. We looked at the client's pattern of business and saw two possibilities.
A Working Capital Loan
Working Capital Loans are used to cover everyday operating expenses, such as rent and payroll, when business is slow. They are simple, short-term loans designed to provide a cash lump sum fast and intended to be paid back in a matter of months - and they can be vital even for thriving businesses during times of growth.
However, the accountant felt that this type of lending might simply compound his client's problems, and eventually leave her with a debt she might struggle to pay back from her available income, even though it might offer a short term solution.
Revolving Credit Facility
Fortunately, we had another answer for short-term funding needs - a revolving credit arrangement. Revolving Credit, also known as Overdraft Replacement or Alternative Overdraft Funding works much like the old-style bank overdraft, and provides a reserve of funding that can be called on as required - although no bank account is involved.
Instead, the alternative overdraft provides a line of credit, usually based on past income.
It is then up to you how much of this reserve of credit you use. Like an overdraft, the facility will only mean a cost when the use the facility, based on the amount you draw down, and the time which you hold it. It can be repaid at any time, and the funds will be ready for use again.
The accountant felt that this would be the ideal solution for his client, and would tide her over the shortfalls - without presenting set obligations during the rest of the year.
We searched a number of providers, and were able to source £20,000 of funding at the lowest cost - providing the financial safetynet the nursery operator needed.
Ready to find out more about finance to solve your clients funding issues? Our experts can work with you to find the most appropriate solutions and the most competitive rates.
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