Boost your business cashflow with these finance tips.
- Rachael Conlan
- Sep 12, 2016
- 2 min read
Updated: Nov 17, 2023
As a small business owner, managing cash flow can be a significant challenge. To address this issue, there are several options available to improve the cash flow of your business.
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These include:
Overdrafts - traditional but declining
The traditional way for a business to improve their cash flow was to run an overdraft. However, with more flexible business finance products emerging, overdrafts are becoming a less popular way to address cash flow issues. You're charged a fee to get an overdraft and ongoing fees to maintain the facility. Also, interest rates on overdraft facilities tend to be higher than for residential home loans.
Credit cards - expensive money
Credit cards are easy to get, easy to use, and can be a good way to finance and monitor employee business expenses. However, they are generally not the most economical way to deal with cash flow problems. The interest rates on credit cards tend to be higher than for residential home loans, and you can quickly get in over your head. There are other specialized ways to improve your cash flow.
Factoring, debtor finance, or invoice discounting
With factoring (also known as debtor finance, invoice factoring, invoice discounting, or invoice finance), a lender gives you a percentage of the invoice (usually 80%) in cash, then the remainder when the invoice is paid. This service incurs a charge but can save your bacon in cash flow terms. Beware that if the debtor ultimately does not pay the invoice, you must repay the lender all the money you've been advanced.
Trade finance, stock finance, export & import finance
With trade finance (also known as stock finance, inventory finance, export finance, or import finance), the lender gives you a percentage of the money against the stock you've purchased. Again, you pay for the service, but it can make all the difference in cash flow terms. Lenders are much less inclined to loan money for stock sitting in the warehouse than they are for confirmed orders. If you've bought stock, it can be some time before the finished goods are sold, and this can have serious cash flow implications - particularly for importers and exporters.
Car leasing & equipment leasing
For many small businesses, leasing cars, computers, and equipment is preferable to outright purchase because it improves your cash flow.
Ready to take control of your business' cash flow? Let Alecto Finance show you how - get in touch with our team today!
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