All companies live and die by cashflow. The recent tragic news of the Thomas Cook collapse brings this home, as did the recent collapse of Carillion Plc. If the cashflow isn’t there, you can’t operate.
In fact, one of the biggest causes of startup failure is the movement of cash through the business to keep it running – even if you have a great business pipeline it can come to a halt.
Unfortunately, as a startup or SME you are already on the backfoot. Payment terms can be lengthy and when running a new company you’ll often find that no one wants to give you credit but most of your customers will expect credit from you.
Despite the government trying to make it better through the prompt payment code, where businesses sign up to pay suppliers within the payment terms set. More than 10 years on it has limited impact, with nearly three quarters of SMEs in a recent survey saying they have experienced late payments within the past year.
Brexit is also proving a worry for many business owners, as cashflow could become even more restricted as the country adjusts to new ways of working. It is often the case that business owners use their own personal money to plug the funding gaps, particularly in the early stages of a business being set up.
Whilst traditionally banks where the ones placed to support businesses, there has been an explosion of other options, from the funders waiting to help to the variety of ways business can now lend money. There is so much more choice than traditional loans or overdrafts but still awareness is very low.
One of the fastest growing ways to free up cashflow is through invoice finance, yet due to little marketing and advertising around it the uptake is not as much as business overdrafts even though it can offer so much more.
The use of invoice finance provides access to money held up in your sales ledger, the facility grows as you do. It gives peace of mind that you will have access to working capital, rather than waiting for customers pay their Invoices when due. It can also heavily reduce the admin burden on business owners of chasing late payments.
There are many providers who can offer this facility and business can get up to 100% of their money released instantly on invoices owed. Navigating the market though can be difficult and finding the best deal for your business can be tricky. This is where brokers like Compare Your Funding can help.