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How to support your business during an emergency

Published on 19th March 2019 - Last update on 20th March 2019

In order to generate a reliable income each month, maintaining your business’ day-to-day operations is crucial. But that isn’t always easy. At any point, you may run into challenges that will catch you off guard, threatening your finances or ability to trade. Yet, no matter whether it involves ageing equipment, late payments, unexpected expenses or a slowdown in sales, the two most important steps you need to do is create a plan and ensure that you’re able to act fast. To that end, being aware of what finance solutions are available could be what you need to get your business moving again. All you need to do is choose a product that’s suitable for your business’ needs.

Invoice Finance

Waiting around to get paid by your clients can be a real headache. But if your business trades using business-to-business (B2B) invoices, you could release up to 90% of the capital contained in any invoice worth in excess of £5,000 - regardless of whether you need money early or the client is late to make payment. Plus, any capital you release isn’t subject to any usage restrictions. This means that you can use Invoice Finance to support anything from late payments, cashflow shortfalls, expenses, utility bills and tax demands to staff wages. In addition, Invoice Finance is available as Factoring and Discounting.

  • 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 lender. 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.

Is there an emergency situation within your business? Need help raising the necessary capital to quickly overcome it? Apply for a Quick Business Loan or Learn more about how your business could benefit.

Merchant Cash Advance

On the other hand, if your business is able to accept credit and debit card transactions, you could receive an advance based on your future predicted card sales using a Merchant Cash Advance.

This unsecured, short-term finance solution works by the lender reviewing your latest card sales for at least 3 consecutive months, allowing them to work out an average. So if your business regularly generates £25,000 in card sales, then the advance could be in the same region, if necessary. Plus, the advance isn’t subject to any usage restrictions, allowing it to be used for anything from cashflow shortfalls, expenses, tax demands, utility bills, repairs to natural disasters. In addition, rather than tying you down to set repayments each month, this type of finance uses flexible monthly repayments instead. This allows the lender to automatically intercept an agreed percentage from each of your card sales until the agreement has been fully repaid.

Hire Purchase

If your business relies upon a valuable piece of equipment, which has fallen in disrepair as a result of constant use, you can quickly replace it by applying for a Hire Purchase agreement. One of a number of products that come under the umbrella of Asset Finance, Hire Purchase works by the lender purchasing the asset on your behalf from a supplier, which is used to secure the agreement. However, before you can start using the equipment in your business’ operations, you must first pay an Initial Deposit. Subject to negotiation, this usually involves the equipment's full VAT and an agreed percentage of its total purchase price. As soon as the initial deposit has been settled you then need to begin making fixed monthly repayments for the duration of the agreement, which could last up to 5 years, plus interest. Once the agreement has been fully repaid, ownership of the asset is transferred to you.

Overdraft Replacement

Finally, another popular way of gaining access to emergency funding is through applying for an Overdraft Replacement facility, which could be set up as either a secured or unsecured agreement. This form of funding works in a similar way to a credit card and offers a line of credit, enabling you to gain access to an allowance based upon your business’ past income. Although you’re not obliged to draw down any of the funds that the allowance makes available, anything that you do use will need to be repaid within 30 - 90 days (depending on the agreement) and is subject to interest. As soon as this has been repaid, you’ll instantly gain access to the allowance again on a revolving cycle. Plus, subject to little or no usage restrictions, Overdraft Replacement acts as a buffer that can be used for anything from late payments, cashflow shortfalls, tax demands, utility bills, equipment purchases to staff wages.

Is your business suffering from an emergency?

If you discover that your business is in the middle of an emergency, the pressure that this puts you under can be immense. But rather than letting yourself get into a panic, you need to form an action plan for how you’re going to overcome it before any lasting damage is done. This is why more and more business owners are choosing to apply for Quick Business Loans in order to overcome the challenges that they’re confronted with. But with so many finance solutions on offer, how do you know which product is suitable for your business’ needs, let alone where to source an agreement from?

At Rangewell, we’re an Access to Finance specialist and have mapped over 400 lenders to be able to offer you an overview of more than 23,000 business finance products. Our services are always free to use and we’ll also guide you through the application process. We’re with you every step of the way. So if you’re looking to raise capital for an emergency, apply for a Quick Business Loan today or find out more with Rangewell.

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David Harrison

David Harrison

Content writer
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