For any business with aspirations to grow, a healthy cash flow is crucial. However, often – through no fault of their own – getting access to the sort of cash that’s required to take the business to the next level can be tricky.
Late payments are often a cause of poor cash flow. In fact, around 665,000 small businesses in the UK have come close to bankruptcy because of payment issues, according to 2018 research by Basware.
Some 53% of those who said their financial viability had been put at risk (which would equate to around 350,000 individuals) have been forced to use their own personal finances to keep their businesses running in the interim.
Nearly a fifth (18%) of the businesses threatened by late payment said they had to put recruitment on hold – 13% said they had to let staff go due to the problem.
It doesn’t have to be this way.
While the issue of late payment is a matter for the UK government and difficult for businesses to keep on top of, it’s possible to plug that gap in cash flow and fund whatever it is you need to take your company forward.
Here are some of your options to generate some cash instantly:
Sale and leaseback
A sale and leaseback agreement is when a business chooses to sell their equipment to a leasing company, often for the full invoice value paid. The leasing company then takes on ownership of the assets, and they are leased back to you over an agreed period of time.
As soon as the purchase is confirmed, you’ll receive the cash directly, providing you with valuable working capital. The fixed rental payments for the equipment makes it easy to budget and manage your cash flow, while the sale of assets means you don’t have to worry about any losses incurred from depreciation.
Operationally, your business won’t have to change as a result of any sale and leaseback agreement – but you could be in a much better position financially.
If you own equipment, machinery or vehicles, refinancing is another great way of raising working capital for your business.
Like sale and leaseback, refinancing sees you sell your equipment and hire it back over an agreed period. One major benefit of refinancing is that it can be fully tax deductible, meaning that you can offset payments against your business’ tax bill. In turn, you can use this working capital in order to expand your business while retaining use of your existing equipment.
Of course, you might choose to go down the route of a business loan to take your company to where it needs to be.
The amount of money you take out will be discussed with your account manager and tailored to your individual business needs. A business loan might be one of the only options to finance intangible assets not suitable for leasing or hire purchase.
Shire Leasing offers all of the above as part of its customer finance solutions. To find out more or to discuss your finance options further, give us a call on 01827 302 066.