Entrepreneurs can be highly predictable people. What do you suppose is every entrepreneur’s dream? If you said “to start a successful business” you would be spot on. But what is the dream after the business is off the ground? That’s simple, they want to make it grow. Look at any business plan in the entire history of business plans, and you won’t find a single one that forecasts static sales and profits.
Every business has growth as a core aim. But while it’s easy to talk about increasing sales and profits, doing so can incur significant costs when it comes to expanding. You’ll hire more staff, upgrade processes and buy more assets. The growth stage can put serious pressure on cash flow, unless finance is managed shrewdly.
Fortunately, in today’s business environment there are more funding options available to businesses than you might think. Let’s take a look at some of the most popular, along with some ways you might be able to conserve cash from within.
Slow-paying customers can be one of the biggest strains on your cash flow, and has even led some businesses to go under, despite having fantastic sales and full order books. Invoice finance is an elegant solution that frees up the significant sums of money that can be locked up in unpaid invoices.
The lender pays you a proportion of the invoice as soon as you issue it – typically around 80 percent. You receive the rest, minus the finance company’s fee, when the customer pays. The major benefit here is that there aren’t so many awkward questions regarding your creditworthiness or trading history, as the lender’s primary risk is the customer’s ability to pay, not yours.
If your business owns property, plant, vehicles or other high-value assets, these can all be used to raise finance. There are numerous options here, ranging from refinancing to hire purchase, so it is worth doing some research into asset finance and discussing with your accountant to work out which is most tax-effiecient for your business.
Free up cash from within
As your business evolves and grows, your working practices also need to change. Tighten up those internal processes that you never had time to formalise. For example, make sure you are invoicing clients promptly. Carry out better checks before offering credit terms. Implementing efficient stock management processes to optimise stock levels. All these will contribute to making sure there is cash where you need it most – in your bank accounts instead of tied up in stock or outstanding invoices.
Peer to peer lending
P2P, as it is commonly known, has now been around for a decade or so and is well settled in. It connects investors with businesses that are looking for finance. There are numerous platforms offering P2P business loans. Businesses benefit from shorter decision times than a typical bank loan, as well as less onerous conditions.