Cash flow is key in business. Ensuring a business has the funds available to meet its commitments in a timely manner can be critical on several fronts. Not being in a position to pay suppliers can leave a business in a precarious position for sourcing the essentials needed to produce their goods and services. If a supplier refuses to deliver based on a bad payment record, the business may have to source less attractive and possibly more expensive alternatives. The supplier, especially if a utilities provider, may report a credit default to the credit reporting agencies, which has the potential to create ongoing credit issues.
Not having the funds to meet staff obligations – wages, PAYG
, and superannuation – can lead to losing staff and serious legal implications. For small businesses especially, cash flow shortfalls can lead business owners unable to pay themselves and meet their own personal financial commitments and that can flow-on to their own credit profile issues. Alternatively, business owners are forced to dip into their personal finances and assets to meet business needs. Thus creating a potentially vicious circle of debt and credit issues. For large businesses, cash flow shortages can lead to a lack of confidence by shareholders, fall in market value or share price which can lead to a devaluation of the business.
These scenarios may be ‘worst case’ examples but they are very real and happening all too often in many business environments. Despite the most astute and professional financial management, businesses can still encounter cash flow shortfalls, either temporary or ongoing. The totally unexpected Health Alert Coronavirus (COVID-19) pandemic
certainly made cash flow a crisis for many businesses. Read more here
As professionals in commercial loans and finance, we offer all types of businesses a range of options to manage cash flow shortages with cost-effective finance solutions.
Finance for Your Business
Our team work with businesses on an individual level to first identify the source of the cash flow shortage and structure a loan solution that meets that specific purpose. Providing finance based on function, not a cookie-cutter approach.
There are options for business loans
available which are designed to meet general business expenses and purposes and finance targeted to solve specific problems.
General Business Loan Types
Businesses can apply for Secured or Unsecured business loan
Secured Business Loans
One category of Secured Business Loan is to cover the acquisition of assets such as vehicles and equipment. For this purpose, Car Chattel Mortgage
, Equipment Financing
, Rental, and CHP
are best suited. A Secured Business Loan is not generally utilised for cash flow purposes as no security is usually available. However, a secured loan can be achieved if an asset or property is provided by either the business itself or the business owner as security against the loan.
Unsecured Business Loans
Unsecured Business Loans are a very commonly used form of finance for cash flow and general business requirements. Typically, this would suit a situation where the cash flow shortage is a more medium to long term need, such as:-
- Investment in business growth by increasing staff numbers, implementing marketing campaigns, and training and development.
- Cover the costs of systems and processes which are not suited to asset-secured loans.
- Clear individual or multiple debts.
- Provide finance to support the business through an extended period where income is not forecast to meet outgoings requirements.
Unsecured loans attract a higher interest rate than secured loans but can be arranged at a fixed interest rate over a fixed term with fixed repayments to provide certainty for the business moving forward.
While this type of loan is technically ‘unsecured’, lenders may request some form of assurance, security, or guarantee be provided. Read more
about Unsecured Business Loans in our recent article and all the details on our dedicated web page.
Overdraft or Line of Credit
A business overdraft
is a very commonly used form of a commercial loan to solve cashflow shortages. This type of finance is particularly suited to businesses where the cash flow is intermittently interrupted, is possibly recurring based on seasonal or other fluctuations, and is ongoing. Most businesses will rely on an overdraft or line of credit at some stage.
We offer an alternative to the traditional bank overdraft with a Business Overdraft provided through a non-bank lender. This facility is set-up in a similar way to a bank overdraft but through a non-bank lender.
For businesses that don’t meet the requirements or eligibility for a bank overdraft, we can seek quotes for a Lender Overdraft. These arrangements can be secured at a very competitive interest rate and can present the ideal cash flow solution for many businesses.
Collecting from Customers
One of the main sources of cash flow problems is slow-paying customers. You deliver the goods and services and then have to wait to get paid. If you’re a smaller producer supplying to a large company, such as a retailer, you may have to agree to their loan terms which can be 60-90 or even 120 days. Similar scenarios are common in the construction sector where sub-contractors must simply agree to the main contractor or tender payment structure.
In order to get customer payments into your account in a timely fashion, Business Finance provides Debtor Invoice Finance
. This is a cost-effective loan product that is structured to meet individual requirements.
Our team secures you this type of finance through one of our non-bank lenders at a fixed interest rate. The lender pays you an agreed percentage of the customer invoice at the time the invoice is raised, up to 80-90%, and the balance when they are paid by your customer.
A fee structure applies and interest is charged based on the time and the amount of funds expended.
So, for a small fee and interest, essentially your business gets paid the bulk of what you are owed on time so you can better manage your cash flow.
Covering Large Insurance Premiums
Another specific purpose cash flow finance product is Insurance Premium Funding
. If you find you’re experiencing cash flow problems when large insurance premiums fall due annually, this may suit your needs. We arrange a commercial loan facility through one of our non-bank lenders to cover the premium. You repay the loan in installments to spread the cost over the year.
Individual Service, Individual Solutions
We are specialists in sourcing and securing business finance solutions. If you have cash flow issues, either temporary, recurring, or long-term, our team will work with you to establish a workable, cost-effective solution.
To discuss a solution , contact us on 1300 000 033
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.