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Quick Solutions to Cash Flow Problems

Written by Keith Tully

When cash flow is restricted making any kind of business progress can be quite the obstacle, especially when you have bill collectors applying pressure from all angles while financial obligations perpetually pile up. If only you could get the money needed to make repayments and/or invest in lucrative opportunities, then recovery wouldn't seem like such a long shot.

 

Fortunately, even companies with poor credit can obtain emergency funding if their assets are valuable enough to be used as collateral. For example, if you have excess inventory or equipment you may be able to use it as leverage when applying for a secured loan or line of credit.

 

Even if you don't have any property or items that could be used to secure funding you may be able to use invoice factoring and discounting to trade future invoice and contract payments for cash advances if your clients have a good history of paying.

 

Here's a more in-depth look at the financing and debt relief options available to struggling businesses:

 

  • Asset Financing

  Asset financing is a broad term used to describe financing methods that use some of your assets (i.e. - inventory, equipment, real estate, or future invoice/contract payments) as collateral or leverage in order to obtain approval for a loan or line of credit. As a simple example of asset financing, a business could take out a secured loan of £2000 under the condition that the lender would have the right to seize a specific asset e.g. several of the computers from the company office

 

  • Invoice Discounting

  Another way to use your future assets to your advantage is to sell some of your unpaid invoices of contract payments to a lender at a discount. In other words, let's say one of your reliable clients is expected to pay you £1000 next month as part of an ongoing contract. You could sell that future invoice payment to an invoice discounting company for a £900 cash advance today. That money could then be used to repay a creditor who is threatening to put you out of business and force your company into compulsory liquidation.

 

  • Factoring

  Factoring is very similar to invoice discounting, except instead of receiving a lump sum cash advance in exchange for the invoice/contract payment you would receive access to a line of credit equal to about 80%-90% of the invoice value. In addition, you don't necessarily have to withdraw the entire amount available and you only have to pay interest on the money withdrawn. Factoring can be used as an ongoing service

 

Click here to learn more about the differences between invoice discounting and factoring.

 

If you're in search of quick solutions to cash flow problems and need quality advice, feel free to email us or call us on 0800 644 6080 for a free confidential consultation. Over the years we have established connections with many lenders and financiers, so we're sure we can help you find a funding source that is suitable for your business needs and preferences.

Keith Tully

Author
Keith Tully
Partner

Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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