How to boost growth using your business’ debtsPublished on 18th April 2019 - Last update on 26th April 2019
Supporting growth is one of the most exciting aspects of running your own business. You may have lots of ideas and an ambitious vision, but if your business has debt, it can be tempting to run for the hills. However, debt can be overcome or even turned to your advantage, providing you know how. For many SME owners, the solution could lie with Working Capital Finance, which can be used for a wide range of purposes. So, if debt is stifling your business’ ability to grow and pursue a brighter future, here’s what you need to know about Working Capital Finance.
Why apply for Working Capital Finance?
If you’re having to contend with business’ debts, pursuing your growth aspirations may seem like a far off prospect. But with the right tools and financial guidance, debt needn’t be a stumbling block. Working Capital Finance could offer you the tools to manage your business’ debts and use them to support both short- and long-term growth plans, even at short notice. So rather than postponing or canceling key growth projects, Working Capital Finance could empower your business, enabling you to pursue your aspirations.
What can Working Capital Finance be used for?
Because Working Capital Finance provides access to a range of finance solutions, many of which aren’t subject to any usage restrictions, it enables you to both tackle your debts and support growth. As such, Working Capital Finance can be used for anything from unexpected payments, utility bills, tax demands, revenue shortfalls, late payments, staff wages, project stages and purchases to equity release. Therefore, with Working Capital Finance by your side, the only thing holding your business back is the scope of your imagination.
What Working Capital Finance solutions are on offer?
In order to drive your business forward and achieve a reliable rate of growth, having access to sufficient amounts of capital is crucial. But if you have existing debt or your revenue is suffering from a temporary shortfall, pursuing growth may be the last thing on your mind. Regardless, if you’re to retain your customer base and stave off local competitors, growth needs to be made a key priority. So, in order to drive your aspirations forward, Working Capital Finance offers you access to products such as:
Merchant Cash Advance
Merchant Cash Advance is an unsecured, short-term lending product that enables you to receive an advance based upon your predicted future card sales. As such, your business must be able to accept credit and debit card transactions in order to qualify. You’ll also need to present lenders with at least 3 months of your business’ latest consecutive sales reports. Using these, they’ll work out an average so, for example, if your business generates £35,000 in card sales each month, you could acquire an advance for the same amount, if you require it. In addition, a Merchant Cash Advance is gradually repaid using a Flexible Monthly Repayment scheme. This allows the lender to intercept debit and credit card sales to automatically deduct an agreed percentage from each until the debt has been fully resolved, without affecting your cash-based sales.
One of the most popular ways of raising capital in order to tackle debt and support growth is using an Overdraft Replacement facility, which can be secured or unsecured. It works by the lender creating a line of credit, which provides you with an allowance based upon your business’ past income. However, you aren’t obliged to draw down any of the funds that are made available so it can be there in an emergency, but anything that you do use is subject to interest and will need to be fully repaid within 30-90 days (depending on the agreement). Once this has been fully repaid, you’ll instantly regain access to the allowance, allowing it to act as a buffer and behave much like a credit card facility.
Asset Refinance allows you to raise capital using the equity contained within your unencumbered assets, which can include equipment, machinery or vehicles that you own outright. Plus, you can even release 100% of the equity held within the asset depending on your financial situation, if necessary. Asset Refinance agreements offer terms of up to 5 years, during which you’ll need to make fixed monthly repayments, plus interest.
Yet another way of seizing back control of your finances and supporting growth is through applying for Invoice Finance. Invoice Finance is a secured form of lending and is secured against the debt contained within your business’ unpaid business-to-business (B2B) invoices. It works by allowing you to release up to 90% of the funds tied up in any invoice worth more than £5,000, and isn’t subject to any usage restrictions. Nevertheless, there are two types of Invoice Finance that you need to be aware of:
- Discounting: If your business is able to generate and maintain an annual turnover of at least £100,000, you could be eligible for Invoice Discounting, providing you can keep your ledgers up-to-date and you have an effective credit control system in place. Rather than having your customer (the debtor) pay your business, they’ll make payment directly to the lender. As soon as they’ve fully paid off the money that they owe, the lender will release a balance (e.g. 10% of the invoice) minus costs and fees.
- Factoring: Meanwhile, if your business has an annual turnover of at least £25,000, you may want to consider applying for Invoice Factoring instead. You’re still required to maintain up-to-date business ledgers, but this option allows the lender to pursue the customer responsible on your behalf, saving you valuable time. Plus, you can also choose to be discrete about the fact that you’re using the services of an Invoice Finance provider. In addition, some lenders may even offer you Bad Debt Protection, safeguarding your business in the event that your customer goes bankrupt or doesn’t settle what they owe.
Need help supporting growth using your business’ debts?
For many business owners, the idea of debt can lead to sleepless nights. Yet although it’s important that you keep it under control, taking on debt can also be used to your advantage, especially when looking to grow your business. This is why Working Capital Finance is an invaluable tool in your arsenal. Because of the products that it provides access to, Working Capital Finance enables you to both resolve debt and use it to generate a lump sum for a wide range of purposes. But in order to make an informed decision, speaking with a qualified business finance professional could prove invaluable.
At Rangewell, we’re an Access to Finance specialist working with over 350 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 through the application process. So if you’re looking to turn debt to your advantage, apply for Working Capital Finance today or find out more with Rangewell.
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