All businesses have expenditure that simply cannot wait; employees wages, rent and paying supplier are the big three, but the money has to be there to pay them. These differ in value according to the type of company you have, for example, a wholesaler or retailer who buys or sells goods will pay out a huge amount to supplier, whereas service providers will have a bigger payroll to fund.
Whichever way you look at it, these are expenses that have to be paid, but there will invariably be times, especially for the likes of SMEs, that the current cash flow situation doesn’t have coming in what has to go out. For times like these are various types of business or trade finance options open to you, some are better than others, and whatever you decide on should have been thoroughly explored and be the best for your company.
The obvious first one is a business loan. Now while these are all well and good, and are great for purchasing assets, or when you are first starting up a new business, you have to consider if going into debt for a long period of time is the right way to deal with what may be only a temporary cash flow crisis. There could also be a problem securing a loan if your crisis has caused you to miss payments yourself, and adversely affected your credit rating.
Ask any SME what is the major cause of their cash flow problem and they will tell you it is having to wait for invoices to be paid. Many small businesses run on very small budgets, and have very little breathing space when it comes to ready cash. Corporations and large companies are a big coup for an SME to land as a client, but there unshakeable rule of having 30-45 days to pay their invoices can cripple a small business.
An option that is being taken up more and more, and once that doesn’t do a credit check, is invoice financing. This is where a company takes your invoices off your hands, gives you a value up front for them, typically 80-90% of their value, then recouping the full amount of the invoices from your clients. This is a safe and sensible way to get through a temporary cash flow crisis without accumulating any debt.
Touch Financial services are one of the top end companies who offer this service, and have saved many a small business from insolvency. Before accepting invoices, they check out the company that owes their money, and assess their ability to pay. This means that even if you have a poor credit through no fault of your own, you will not be rejected like you would be if you applied for a loan.
Featured article by Touch Financial services