Richard Waldman, Group Sales Director at Ultimate Finance
While some companies are growing strongly right now, many are finding it difficult to plan long-term thanks to political and economic uncertainty. The FSB has pointed towards the “chaotic” Brexit negotiations to explain the recent drop in business confidence. On top of this, the latest UK Government figures show business insolvency is at its highest since 2014.
Whether they are growing or fighting to keep their company alive, everyone is looking to establish a strong support network to ensure they thrive in the coming months. This is a space where many SMEs rely on flexible finance and there are several routes for businesses to find the good funding they need.
Asset finance
One reason many companies turn to lenders is that they need to purchase high-cost equipment but don’t have the funds available to do so easily. An investment in new infrastructure can help a business kick-on or enable them to replace equipment that is no longer up to the task. There’s never a good time for equipment to fail but it often seems to occur at the worst time. Maybe a manufacturer has just received a substantial order from a customer when a pivotal piece of kit malfunctions – if repair isn’t cost-efficient, asset finance is a flexible option to resolve the issue.
So how does it work? When equipment is needed but businesses don’t have the means to purchase it outright, lenders can resolve the issue for them. An asset finance provider will buy the necessary equipment on their behalf and lease it to them for a fixed monthly rate. This decreases the impact on a company’s cashflow and simplifies the budgeting process.
Invoice finance
Ask SME owners to discuss issues that harm their business’ cashflow and late payments will come up repeatedly. Bacs research shows that UK small businesses spend £6.7 billion collecting money they’re already owed, with the cost ofrecovering overdue money now at an average of £9,000 for each business. Worryingly, a third of SMEs are relying on overdrafts to help them meet monthly obligations.
This is where invoice finance comes in. With it, businesses can access a significant percentage of the money they’re owed within 24 hours (often up to 90%). The sales ledger is one of a company’s biggest assets and can be borrowed against to get cash that’s tied up in unpaid invoices. This means that instead of companies being forced to wait 30, 60 or even 90 days for payment, companies enjoy accelerated cashflow and increased working capital simultaneously.
Bridging loans
Buying a property can be a very daunting process and it’s no easier for a business looking to purchase, refinance, or release equity out of a property.
If a business has found the perfect property but doesn’t have the funds available or commercial mortgage agreed to quickly close the deal, bridging finance is the perfect solution. It enables a business to complete the deal and then provides some breathing space to arrange long-term funding. This fills a gap and can keep a deal alive which would otherwise fall through. Similarly, many businesses have equity tied up in the properties they own, and a short-term bridging loan can be a useful source of funding to improve cashflow and allow any potential opportunities to be seized.
Above and beyond
A good flexible funding partner offers a variety of financial support tools and will recommend what will best serve the needs of a business. Looking beyond the financial statements, they’ll have the insight to be able to make an assessment of a company’s management, their objectives and prospects. In short, they’ll look to build an understanding of what makes the business tick so they can propose financial options that will help a business to succeed.
As the challenges facing SMEs continue to evolve, more and more will look to find a flexible funding partner that can resolve their cashflow issues. With the right backing in place, they’ll become a central part of the company’s success story. After all, once they’re enjoying the benefits of good funding, they’ll have the peace of mind to know they can concentrate on pushing ahead with their growth plans.
