Many businesses have found acquiring funding through the traditional sources to be more difficult over the past 12 months.
Luckily, there is more than one way to finance business operations.
Today’s climate requires strategic and carefully developed strategies to make sure you put the business in the best possible position for the current situation - and for the future.
You may have shifted your focus from growth to strengthening your balance sheet to make sure the company remains on strong footings. Outsiders often provide a fresh set of eyes on complex problems while ensuring strong future cash flows. This is especially important as furlough comes to an end and your cash flow will again change and require further support.
How to determine if you need financial support:
Seeking financial support doesn't have to be just when you're experiencing financial strain, but it is the most common reason. Your business may be challenged with the following scenarios:
Cash flow problems: Is your cash flow sufficient to support your business? If the answer to that question is no, or even maybe, then looking at other financing options may be the right next step for your business.
Near-term commitments: Is there a concern that you may be challenged by your short-term commitments coming from salaries, accounts payable, or other expenses? That too would be reason to bring about some research into funding options.
Speed of accounts receivable: Are your clients taking longer to pay their bills? This may be a small concern initially, but it should not be taken lightly. The speed at which you are paid for goods and services has a direct impact on your cash flow and your ability to maintain operations.
What support exists outside of government aid and traditional financing?
Because of the challenges many businesses have had recently, there has never been a better time to consider alternative funding products.
If your business generates strong invoice volume but has slow-paying customers, Invoice Financing could be your best solution.
With this finance option, you borrow money against the value of the invoices that are due to you; these loans typically pay out 85% of the value right away. A unique feature of this loan is that if the invoice isn’t paid, you’re not on the hook for that non-payment.
If you need to purchase higher-value equipment, asset financing may be the right strategy for you. The asset itself is the security used against the loan and nothing else; which makes it rather unique. These loans typically are managed like a “lease” and they can claim the item as an asset. This loan is a simple way to add high-quality physical assets to your business without a large cash outlay.
A commercial mortgage is a standard loan in a lot of businesses. Driven by market forces, these loans can be used to buy new property, refinance other assets, pay down debt or use it to run your day-to-day operations.
While these are seen as riskier than residential mortgages, and they carry higher interest rates, they often offer better rates than standard business loans. Because these loans have more flexibility, they can often have larger impacts on your business.
Business Loans (Secured & Unsecured Loans)
There are two types of business loans: secured and unsecured. These are a more standard way of financing and last for medium to long-term. A “secured” is backed by a house, a car, or other large asset to backstop the loan. This protects the lender if the borrower finds they can’t make the payments.
You can also get an unsecured loan. Unlike the secured loan, this loan has no collateral other than the lender trusting the lendee’s business. This path is often a quick and easy strategy to add cash into your business operations. However, be aware that this loan does typically require the borrower to pay back the loan, if for some reason the business is unable to complete it. Both of these loans are standard in business and can be used for anything the business needs.
What can I do to find more support?
The global pandemic has caused many businesses to need additional support they had not planned on. The UK government has a large list of grants, loans and equity programs for businesses to tap into for support.
Another option you should consider outside the traditional financing is an independent financial broker like us, TSF. There are multiple benefits to using a financial broker, including:
- A dedicated advisor researching and securing funding for you;
- Helping you find the right financing options to put your business in a stronger position;
- Opening your eyes to more diverse options you may not have previously considered;
- More support and ease with the process of accessing funding, tailored to your needs.
There is a range of unique options to address your working capital situation, and that is what we specialise in developing for businesses.
Our team has consulted with businesses of all sizes and industries over the last 30 years. Our passion is simply helping small businesses who need an extra hand; at no cost to you!
Send us a note and we’d be happy to chat.