How to apply for Working Capital FinancePublished on 21st November 2017 2017-11-21T01:01:38+00:00 - Last update on 21st November 2018 2018-11-21T14:54:19+00:00
Every business needs positive Working Capital, however, for the SME community, that can be easier said than done. That’s why more and more business owners are incorporating Working Capital Finance into their business plans to help manage their working capital. If your business has fallen prey to negative working capital, you need to act fast. Rather than standing idle and hoping it will eventually go away, you could resolve the issues responsible and invest in your business with Working Capital Finance. This is a specialist business finance package containing a variety of finance solutions. However, you now need to decide which product is the most suitable for your current business situation, and how to apply for Working Capital Finance, including products such as:
Why should I apply for Working Capital Finance?
Simply put, your working capital determines how much money your business can safely spend, or be used as an income, before running into financial difficulty. It does this by totalling up your Current Assets and then deducting your total Current Liabilities. Current Assets are assets that can be turned into cash within 12 months, and can range from cash equivalents, account receivables, inventory and stock to prepaid expenses. Meanwhile, Current Liabilities are expenses that may be settled within 12 months, and may involve staff wages, utility bills, tax demands, insurance premiums and bank account overdrafts. If your current liabilities outweigh your current assets it means that your business has negative working capital and is losing more cash than it can safely afford. Should this continue, it could mean that your business is heading for insolvency. However, with Working Capital Finance you could turn this around by getting hold of the cash you need to carry out any number of key investment projects in order to increase your business’ monthly revenue. If you choose to apply for Working Capital Finance, your business could benefit from a range of finance products, including Invoice Finance, Merchant Cash Advance, Asset Finance, Unsecured Loans, Secured Loans, Revolving Credit Facilities and Overdrafts.
How to apply for Invoice Finance
Invoice Finance solutions, such as Invoice Factoring and Invoice Discounting, allow you to unlock up to 90% of the cash contained in any business-to-business (B2B) invoice worth in excess of £5,000. In order to qualify, your business must be able to trade on credit with other businesses and have a trading history of at least 2 years. If applying for Factoring you may also require an annual turnover of at least £25,000, whilst Discounting, on the other hand, requires a minimum of turnover of at least £100,000. Plus, as well as showing that you’re able to maintain your ledgers, you’ll also need to express that you the means to collect payment from the debtor (your customer) in a realistic time frame. However, in regards to Invoice Factoring, some lenders may approach the debtor and work to collect payment on your behalf, saving you the time and hassle.
Although this can vary, some lenders may expect you to begin receiving instalments, or full payment, within 120 days after the invoice was raised. But before lenders will even consider offering your business an advance, they will want to know whether the customer responsible for the debt can be relied on. This will be assessed by reviewing the strength of their credit profile and that they have a history of making repayments on time. If the debtor’s reliability can’t be proven, lenders will be reluctant to offer an advance. So when applying for Invoice Finance, the documents that you need to submit must cover details such as:
- The name and address of the company responsible for the debt
- Invoice reference number
- The date on which the goods or services were provided
- Details of the products or services provided, plus their cost
- Your financial records
- Your sales ledger
- Outstanding invoices (Unless using selective invoice financing)
Although Invoice Finance products are secured, they do not take security in the form of physical assets. Instead, lenders will use the money owed to your business as security. However, it’s also worth noting that many invoice finance providers are now offering the option of Bad Debt Protection as part of their service, meaning that if your customer goes bankrupt or simply fails to pay up, you won’t be liable. But, it’s possible that some lenders may also request a Personal Guarantee in order to gain additional reassurance.
How to receive a Merchant Cash Advance
The Merchant Cash Advance is one of the most flexible products on the financial landscape. Unlike your traditional business loan, lenders pay no attention to your credit score or business history. That’s because this product focuses on your business’ credit and debit card sales, so being able to support card payments is a must. To apply, you must present lenders with 3 or more of your latest consecutive sales reports, containing bank statements and card processing. Should any potential lender agree, your submitted sales reports will determine the size of the lump sum on offer and the Flexible Monthly Repayment Scheme.
How to qualify for Asset Refinance
Asset Refinance is a popular financial tool that enables you to release equity contained in any valuable, unencumbered assets logged inside your business’ balance sheet, worth in excess of £5,000. The size of any potential lump sum will also be determined by the asset’s worth after an evaluation has been carried out. To apply, you must present lenders with your credit score and business history. You’ll also need to transfer control over the asset concerned during the course of the agreement, allowing you to receive the lump sum.
However, there’s no need to worry, you can still use the asset as you would’ve done otherwise. Plus, after the Fixed Monthly Payments and final lump sum or balance have been settled, control of the asset is transferred back over to you.
Sourcing the most appropriate Working Capital Finance solution for your business
Searching for a finance product that’s right for your business can be daunting. There’s so much to choose from, but you need a product that matches your business’ unique situation. When seeking Working Capital Finance, breathing space is important. On your own, it can be hard to find a lender who understands your sector and appreciates the challenges you may face. But you don’t need to go it alone, help is at hand. So If you want to learn more about Working Capital Finance then visit our page, or if you are ready, apply now.
Talk to us on 0203 6374 150 or at [email protected] to discover how you can unlock your business’ full potential… today!
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