Variable Cashflow Calls for Flexible Financing Solutions

Anyone that runs a small to medium-sized business will have regularly experienced peaks and troughs in their cashflow, driven by the sudden need for extra staff or goods …

Anyone that runs a small to medium-sized business will have regularly experienced peaks and troughs in their cashflow, driven by the sudden need for extra staff or goods to meet an order or a delay in a contract being settled.

The financial landscape has changed over the last decade and for business owners this means that there are more flexible financing solutions available now than ever before. The traditional business financing method of a bank overdraft is still very much in existence but a fixed loan amount and no set repayment period does not offer the same tractability that other flexible financing options can.

Finding a competitive edge

In a fast-paced competitive trading environment, one of the advantages of a small to medium sized business is that they can benefit from accessing some of the flexible financing options available to react swiftly and capitalize on opportunities that present themselves.

Access to sufficient capital via business loans is a significant component of a successful company set-up when they are trying to gain an edge or cope with a rising demand in orders or complete a sometimes unexpected but welcome spike in workload that calls for extra resources being used, which need to be paid for in the short term whilst awaiting payment from the customer.

By taking an intelligent and informed approach to using business funding a business owner can put themselves in a position where they have access to enough money to allow the company to expand and cope, by covering the costs associated with acquiring stock, new equipment and extra staff.

It is often considered better to be proactive rather than reactive but as many of us will know when running a business, it is not always easy to predict when peaks and troughs in the cashflow are going to occur and a sudden uplift in orders can actually put pressure on you when you only have a fixed overdraft to fall back on, which is why you need to consider flexible financing options in order to gain a competitive edge.

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Future seekers of finance

According to survey results from the BDRC SME Finance Monitor, almost 20% of small business are classified as future would be seekers of finance. This means that these are the percentage of business owners who are likely to be seeking finance within the next trading quarter.

Many of these same companies expressed feelings of discouragement that if they were to try and seek finance their application may well be refused, and this was a barrier to making an application in the first place despite identifying a future need for finance to help grow the business.

These future seekers of finance are a good example of why the growth in alternative sources of business finance other than the traditional bank loan or overdraft facility are to be welcomed, as these same company owners discover that there are funding solutions out there in the marketplace that offer transparency and do not require a tough and often intrusive application process.

Alternative sources

An overdraft or loan over a fixed period may well be a good option if you know what your cashflow requirements and capital expenditure are going to be over the next couple of years, but many businesses find they have to react to situations a lot more quickly than that, which is why it pays to seek out the alternative sources of finance available.

Flexible loans

If you need cash for a couple of weeks or a couple of months then there are online lenders that offer the chance to obtain finance quickly without the usual meetings and levels of paperwork you would associate with a loan application for a business.

These lenders will give you an instant decision and transfer funds into your account for immediate use once everything has been approved, and a flexible business loan like this can certainly work well if you are trying to bridge a gap in your cashflow for a few weeks but can afford the weekly repayments in the meantime.

Invoice finance

You could also consider invoice finance or factoring, which will help to free up the money you have tied up in unpaid invoices.

The finance provider will charge a percentage fee of the invoice for borrowing the money and give you access to up to 90% of the invoice value once you have signed up and the invoice has been approved. This method can be worthwhile provided your customers are considered creditworthy by the factoring company but it is another option that is more flexible than a traditional overdraft.

As any business owner will know, variable cashflow calls for flexible financing solutions.


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