Finally we are starting to hear of some positive economic news emerging recently withGDP increasing and the number of insolvencies declining. Hopefully we are just beginning to see the light at the end of the tunnel as UK PLC emerges from what, for many, has been a long and arduous journey. That said, some planning and care needs to be exercised to ensure owner managers have a robust and flexible cashflow sufficient to take advantage of any upturn in sales due to the better economic picture. It’s a well-known fact that more businesses fail whilst coming out of an economic recession than actually during the period of downturn, and therefore now is the time for a review of the financial position of the business. Business owners should be wary in case their long-standing bank facilities are not able to increase in line with their improved sales performance and support business growth. Additionally, renewing existing banking facilities may be more difficult than thought as banks tighten their credit policies and many businesses may have poor trading results over recent years. This is especially true of overdrafts, which can prove restrictive especially as they are often based on the last year’s financial performance.
Where else to turn?
Alternative external finance facilities exist for many owner-managed businesses, especially those looking to expand and grow their operations. Invoice finance facilities, such as invoice factoring and invoice discounting, actually grow at the same speed the business does. More and more cash becomes available as more invoices are raised and sales volumes increase. The benefits when compared to an overdraft are that:
- It generates more cash than an overdraft – usually twice as much
- Less personal security is required
- It’s based on sales and therefore grows with the business - meaning you don’t have to keep going back to the bank asking for more!
- It's not based on historic balance sheet performance and therefore is suitable for businesses in a turnaround, showing recent losses or highly geared
It’s apparent that, in the current climate, invoice finance provides a much safer and more flexible funding solution for many SMEs and they have cash available to lend and an appetite to match. Why not browse our website and find out a little bit more about how invoice finance works and how it could benefit your business, or give our team of experts a call today on 0845 602 9354 for a friendly no-obligation quote.