Legend has it that the best time to plant a tree is twenty years ago, the second best time is now. It’s an old Chinese proverb, but it rings true especially in today’s turbulent financial markets. Let me explain why below. Most businesses in the current climate have been negatively impacted by the difficult economic conditions, whilst the majority will have suffered from poor trading in comparison to previous years. SMEs and small businesses will often wait until the last possible minute to consider ways to increase cashflow, but this can prove to be more difficult to organise at the drop of a hat right at this moment. For many, it is becoming more difficult just to renew existing overdrafts, never mind obtain increased facilities! But if they are expecting just a few losses and a slight weakening of the balance sheet, they could be in for shock when they file their accounts.
If a worsening balance sheet causes concern:
- Rating agencies could reduce the suggested credit limit.
- Suppliers could restrict levels of credit available, putting a sudden hefty strain on cashflow.
- The bank manager, who historically would have rubber stamped the renewal of the overdraft, may be under pressure to increase both the pricing and the personal security.
This is why UK businesses should be looking to follow the advice in the proverb and plant that metaphorical tree as soon as possible!
Company directors should act early
To avoid last minute problems with funding issues, I recommend:
- Early discussions with key suppliers
- Speaking with the bank to clarify their position
- Considering business finance alternatives to speed up cashflow and increase availability of funding lines
One such funding alternative is invoice finance, such as Invoice Factoring and Invoice Discounting facilities, which allow a business to firmly root its finances and have access to a funding solution which grows in line with the company. Why not sow the seeds and plant that tree today by contacting us on 01756 694068 (or 0330 1232437 for mobile) to see whether our invoice finance facilities might just provide your business with the firm financial foundations you crave.