The best ways to pull your business out of financial trouble

Maintaining a smooth, efficient business is extremely hard work. For any business of any size, it requires constant care and attention and even more so for start-ups and small businesses. At almost any point during a business’s lifespan, it will struggle financially at some point. When considering the current economic climate, creating a success is becoming even harder.

Unfortunately, for young newer businesses it can often spell the end. It could be through no fault of the business itself, it could just be bad luck. Seasonal differentiations hit harder than anticipated, a large piece of machinery breaks, or perhaps the contract that was dependent on is holding up the business too much.
If the problem is down to difficult clients and late payments, invoice finance is what can potentially find the solution for you. Most factoring companies will give you up to 90% of the invoices value. Factoring companies will check the quality of the invoices in question, including the client themselves and their value.

Instead of a rigorous look into your whole business like a bank lender would do, a factoring company would only look into your invoices, their value and the clients in question. Not only does factoring allow you to help your cash flow troubles, it also means business owners can do what they do best and run the business to it’s maximum potential.

The majority of these would normally spell the end financially, but it doesn’t always have to be the case, there are ways of pulling yourself out of financial trouble. So, what can be done? Thankfully there are a few options available, which can just ease the pressures of running a business.

Options other than a bank loan

Dependent on what financial troubles the business is facing, will effectively decide what options there are for recovery. A bank loan might often seem like the easiest option, but rarely is it that simple. Traditional bank loans do offer extra funds to ease cash flow troubles, however, there are huge amounts of stress involved with securing a bank loan and it means the business would take on additional debts extras to those they may already have.

If the problem is down to late paying clients affecting your cash flow and not a problem with the operations of the business, although a bank loan would tide you over, it is not the solution. Invoice factoring (https://wffinancialsolutions.co.uk/invoice-finance/factoring/what-is-inv...) can provide the ideal solution when it comes down to clients who don’t pay on time. Effectively invoice finance allows you to get an advance based upon the value of your invoice.
A factoring company will typically advance you anywhere up to 90% of your invoices value, they will then go out and collect the invoice, taking their fees and then finally returning the change. Instead of a rigorous look into your whole business, like a bank loan, a factoring company would only look into your invoices, their value and the clients in question. Not only does factoring allow you to help your cash flow troubles, it also means business owners can do what they do and run the business to its maximum potential. Importantly the cost of factoring (https://wffinancialsolutions.co.uk/invoice-finance/factoring/cost-of-fac...) can often be cheaper than a bank loan and means you don't have to take on any additional debt

Incomings and outgoings

Planning your incomings and outgoings is a huge part of any business structure. Every business should have a detailed and through cashflow forecast as it’s basic. But there are also plans which can be put into place to make the most out of money coming in and out of the business.

• Deposits should be the business norm – Having some money come into the business every time you seal a deal is much better than none. It can ease cash flow burdens for you and can appeal to the client, as it means not having to pay in one large lump sum.

• Press clients for payment – There is nothing wrong with asking your clients to pay if they are late. This does not mean being overly aggressive, but a simple email or phone call is better than nothing.

• Don’t be afraid to negotiate – If your business is dependent on suppliers, don’t be afraid of talking to your suppliers and asking for extended terms, or coming to an arrangement. Remember, more often than not they will want you to succeed.

• Make full use of outgoing payment terms – If you have the option of paying within 30-days, there is no problem in paying on the last day. If you are dependent on payments coming in before you can make outgoing payments, there is no issue with paying on the last day.

Commercial finance options

Broken or damaged assets are an obvious problem for any business and can sometimes bring the whole business to a standstill. Commercial finance gives you an option to purchase or lease equipment, paying on a monthly basis as appose to one big lump sum. For small business, or start-ups this can be hugely beneficial as it makes payments manageable. Asset finance a form of commercial finance, will allow you to either own an asset over the course of its payment, or in certain circumstances upgrade it.

If your business is the opposite, and is struggling with cash flow, but is asset rich, those assets can be used as way of financing the business. As a commercial finance option, lenders will advance you cash and use your assets as security. It provides a less risky solution to taking out a traditional bank loan. It is also much easier to agree and allows you to agree more sustainable monthly repayments.

Agree a formal repayment plan

If the business debts in questions have reached unassailable levels and it can’t be saved by streamlining the business operations or a finance plan, in order to avoid a liquidation, a formal repayment plan will be the best route forward. By arranging a repayment plan with the creditors in question, you are able to pool all of your debts into one affordable monthly amount, which is paid over an agreed amount of time.

Creditor pressure combined with business debts does not always have to mean the end. Although it may feel that way, as long as the issues are tackled quickly and efficiently, the business should be able to survive.