For many businesses, the Coronavirus pandemic has had a significant impact. It has been particularly challenging for SMEs, who have been among the hardest hit due to their limited cash reserves. With national lockdowns imposed, regionalised lockdowns occurring in some areas, and for many sectors, a drop-in demand and sharp falls in revenue, businesses have found themselves in unchartered waters and in desperate need of a way to bridge the temporary gap in their finances.
Over the past few months over a million businesses have taken advantage of the government backed loans and support which have been made available. These have been a very welcome lifeline, but a lot of businesses require more than is currently on offer from the government. Soon will see the return of regular tax, VAT, and rent bills looming, all of which will need to be paid. For those whose cash reserves are once again dwindling and who have already used up the extra capital obtained from their CBILS or Bounce Back Loan, this is a frightening prospect.
There is a light at the end of the tunnel, however.
We are now beginning to see many businesses showing strong signs of recovery, with customers gradually returning, and new orders being received. But for those with limited cash-flow to fund these new opportunities it can feel like a hollow victory. Afterall, what good are orders if you cannot afford to buy the stock or pay the staff needed to fulfil them?
Thankfully, there is a solution to this challenge.
Cash-flow solutions are now being made available by lenders to help businesses make vital payments and support their business growth. For many, these this will be the critical lifeline they are looking for to save their business.
We are seeing plenty of options on the market for both business to business and business to customer models, and there are funding solutions that can help with short term cash flow requirements.
Here are 7 ways CBILS and Bounce Back Loan follow on finance could save your business from folding due to of lack of funds:
1. Raising cash against monthly card terminal income
If your business takes a significant amount of sales by credit or debit card using a card terminal, a merchant cash advance could be exactly what you need. Some specialist lenders will allow you to borrow money based on your historical takings via your card terminal.
2. Raising cash via a short-term loan 3 - 24 months
In many cases a short-term loan to get the business through the turbulence is all that is required. Borrowing a fixed sum until recovery is fully underway could help you pay looming overheads now and repay the money later out of future profits.
3. Utilising an overdraft type facility for use when required
If your businesses cash balance periodically fluctuates between surplus and deficit, an overdraft type facility can really help. It gives your business headroom do dip in and out of additional cash only when it is needed. This is ideal if you only need extra cash for parts of the month.
4. Raising cash against single invoices or against selected invoices
Making sales on credit terms via invoice rather than taking cash up front leaves your business having to shoulder the cost of the sale until it gets paid for by the customer. This can be particularly problematic for large invoices. Some lenders offer the ability to use an outstanding invoice (or invoices) as security for a loan. This means you could effectively get the cash up front even though your customer does not actually pay you for 30, 60 or even 90 days.
5. Raising cash against the whole debtor book
Sometimes instead for borrowing against a single large invoice, it can be more attractive to simply borrow against your whole sales ledger. This is often the case if your business has a high volume of lower value transactions which leave the bulk of your working capital tied up in customer credit terms. Securing against your debtors is a tried and tested method of financing working capital, and there are several lenders out there who can help with this.
6. Financing stock purchases required to fulfil an order
Selling physical stock is often the biggest challenge when it comes to funding cash flow shortages, because generally you need to order and pay for the stock before you can fulfil an order from a customer. Obtaining specialised financing to pay for stock to fulfil customer orders could be the essential piece of the puzzle needed to prevent your business from stalling. There are currently lenders in the market willing to provide this service.
7. Funding your Tax and VAT payments due, even if deferred in quarter one this year.
It was famously once stated by U.S. founding father Benjamin Franklin, “in this world nothing can be said to be certain, except death and taxes”. While death is a little outside the scope of our expertise, obtaining cash to pay your outstanding tax bill is something we know a bit about. One of the biggest concerns for many businesses who have taken advantage of tax deferrals from HMRC during the pandemic is the outstanding amounts are eventually going to fall due for payment. If you are worrying about being unable to meet the payments, there is finance available to help with this if you know where to look.