Most businesses experience significant fluctuations in their cash flow, including some major peaks and troughs. In particular, small businesses – and even more so start ups – can find their liquidity seriously compromised.
One reason is overspending. This can be a sign of a poorly managed business, but in some cases it can be unavoidable – for example, when needing to purchase additional stock in preparation for new orders. In particular, a short-term discount from a supplier may prove very attractive.
Alternatively, many businesses experience seasonal fluctuations, with their turnover slowing down at certain times of year. Cash flow is usually negative during these quiet periods but substantially positive when they are busy.
Meanwhile, in some cases the problem can result from something as simple and unavoidable as a slow-paying major client.
The answer, in all three scenarios, can be a short term business loan rather than an expensive bank overdraft.
The thinking behind short term business loans
Short term business loans make it easy to ride out cash flow fluctuations, and because you only borrow when you need to and repay as quickly as you are able, you can keep interest and charges to a minimum.
So what forms of short term finance are available?
Emergency business loans are the solution when you hit a sudden and unexpected financial demand such as VAT and HMRC tax arrears, insufficient funds to complete an order, slow paying customers. At Cashsolv, we fund this type of short term business loan ourselves to avoid any delays – in fact, we can have anything from £20,000 to £250,000 in your bank account within 24 hours.
Alternatively, with asset finance you can borrow against the value of your premises, plant and equipment. For this type of loan, we use a panel of lenders. There are two reasons for this: first, we look to pair the appropriate lender with the client, secondly we can negotiate the best interest rate for you
However, if you wish to smooth out ongoing peaks and troughs, invoice finance can be the perfect answer.
Invoice factoring or discounting: the solution that keeps on giving
Targeted at business-to-business companies, invoice factoring enables you to borrow up to 85% of the value of your invoices – the moment you issue them. Once the lender has lent against your invoices, their credit control team are responsible for ensuring that your clients pay promptly.
Alternatively, with invoice discounting you get the same instant finance but keep control of your own debtor ledger. This means that your clients do not find themselves dealing with a third party, and reduces the fees you pay as it involves less work for us, but you may find it takes your clients longer to pay so the total interest can be higher. The choice should depend on your relationship with your clients and on the quality of your credit control team.
At Cashsolv, we are specialists in all aspects of alternative finance and debt collection, and are on hand to help with all your borrowing needs. To discover how we can assist you, please visit our business finance page.
For further information Download our Guidance Paper on 'How short term business loans can help your business finance problems', or view the following relevant pages:
- Business loans
- A guide to Short term business loans
- Emergency business loans
- Emergency business loan - why not use a bank
- A guide to Small Business Loans
- How quick business loans can encourage business turnaround
- How to get a quick business loan
- The pros and cons of secured business loans
- How to make business finance work for you
- A case study: How we helped a recruitment firm invest for growth
- A case study: Quick business loans could be the answer
- Business loan calculator
- Construction Finance