Cash Is King
As a business dealing with steep price inflation while trading out of a global pandemic, you know conserving cash isn’t just the job of your accountant; it is about self-preservation and keeping the doors of your business open.
Is price inflation going to remain a problem in the UK economy? I don’t have a crystal ball, but many clients are seeing price rises of 10% – 50% or even doubling in their supply chain:
• the cost of all raw materials are still rising
• oil, wholesale gas and electricity prices are still surging
• the cost of transporting materials or goods are at record levels
• chronic staff shortages persist in multiple sectors of the supply chain
Cash Is King – we do not know what is around the next corner – or how much it will cost. So businesses need to manage their cash flow so that they have some available to deal with all eventualities.
So what can you use to conserve a level of cash within the business while you still have overheads, delays to receiving client payments and business expenses?
➢ For some people this may finding out what finance products and tools are available to them
➢ For others it might be a bitter pill to swallow, or a ‘last resort’ to use finance
Cash flow is the lifeblood of business, and having enough to meet unexpected costs and take up new opportunities is worth sacrificing a small amount of margin to finance your business.
SO WHICH COMMERCIAL FINANCE PRODUCTS CAN HELP YOU CONSERVE CASH FLOW TO AFFORD UNEXPECTED COSTS AND STILL TAKE ON NEW OPPORTUNITIES?
Commercial Property Refinance
Refinancing commercial property could be used to conserve cash flow in more than one sense:
• Refinancing your existing mortgage onto a new deal could improve the rate of interest that you pay (reducing outgoings) or it could offer you fixed rate protection for an agreed period (limiting your costs for that agreed period)
• Refinancing commercial property to raise additional funds for your business is doing so over an extended period (commonly 15 – 25 year terms) and often at a significantly improved interest rate to those available on short term business loans, due to the security that the lender has in your property
We work with lenders who can also consider residential and BTL property as security for loans for business purposes – not suitable or viable for everyone, but if it was it could significantly improve your cash flow profile over a short term unsecured loan.
Invoice Finance
What other financial product will pay you for most of the work that you have completed just a few days after you have completed it, when your customers won’t be settling anything with you for another 60 to 90 days?
Without that immediate cash flow you will have to cover the cost of wages, contractors, overheads, suppliers – and then if you have the opportunity to take on more work or another project, do you have the cash flow to do that now or will it have to wait until your customers settles in the future?
“The ends justifies the cost of the means” – many businesses won’t be able to manage without these facilities in the current economic climate – and Invoice Finance will be one of the best cash flow conservation tools available to companies.
Trade Finance
Trade Finance can be with UK based companies as well as overseas – companies will either buy raw materials that they manufacture or assemble to create finished and saleable goods, or they will purchase ‘finished goods’ from a manufacturer or supplier.
Trade Finance facilities can be flexible to accommodate deposits if required on order and other costs including import VAT and freight if these are applicable to you.
Your business can improve prices and terms from having the backing of a trade facility and being able to pay earlier, and funding your supply chain leaves crucial cash in the business to cover overheads and unexpected demands on the company.
Short Term VAT / Corporation Tax Loans
Most businesses – of any size – don’t have the cash flow currently just to be able to ‘put away’ VAT and Corporation Tax so that when the quarterly or annual bill lands they can just clear it off.
Life – and all the costs that come with it every week of the year – gets in the way, especially in an environment of steep price inflation.
We have a lenders offering short term loans to help to settle some or all of your VAT or Corporation Tax bill – you can repay weekly or monthly as suits you best – but the big win for you here is conserving cash by spreading the payments and keeping some liquidity for whatever might come next.
Merchant Cash Advance (MCA)
Using the regular income from Debit / Credit Card transactions to help fund business borrowing, helping to conserve cash flow in quieter periods.
Repayments vary according to the level of business you do – meaning no ‘must make’ loan repayments if business dips. When you do more business you repay more, and when quieter payments are automatically reduced.
Lease or HP Over Buying For Cash?
None of us are going to trade out of this environment by standing still – and vehicles and assets can generate new business – but you should conserve cash and use smart Asset Finance.
Think about not ‘paying cash’ for new vehicles and assets – using the right finance in this environment is the smart choice; we work with expert partners can source the most suitable Lease or Hire Purchase (HP) deal.
Asset Refinance
Your business may have hard / soft assets, or stock, that is unencumbered or with significant equity, that you might consider putting to work to generate much needed cash flow for your business at this time.
We work with Asset Based Lenders who our clients use to access cash that they already have but that is locked up in the existing assets of the business.
We know that conserving cash is a juggling act for businesses currently – why not ask us to help you keep some of the moving parts up in the air?
Mark Grant, May 2022.
