Fuelling Your Business Growth: The Power of Cash Flow Finance
Cash flow finance involves leveraging business assets to help your business to grow.
Did you know that cash flow problems are one of the leading causes of business failure? If a business has good cash flow, it has enough funds to pay its expenses and any debt repayments that it may have, on time.
Cash Flow Finance Options
LINES OF CREDIT
A business line of credit is similar to a business credit card, except that it’s secured by a business asset to lower the lender’s risk (and the interest rate). Commercial or residential property is the preferred form of security of most lenders.
A business line of credit allows a business to automatically access loan funds up to a pre-set limit to help overcome any cash flow issues. Interest is charged on any credit provided.
OVERDRAFTS
An overdraft facility is a cash flow finance option that is attached to a business bank account. It allows funds to be withdrawn even if there are no funds in the account, up to a pre-set overdraft limit. Interest is charged on any overdrawn funds.
INVOICE FINANCING
Invoice financing (also known as invoice factoring) allows a business to immediately access money that is owing to them from their customers. Some businesses extend credit accounts to their customers that give them a certain time to pay for products or services (for example, 30-day accounts).
If you have this business model and you have cash flow issues, you may be able to sell your invoices to specialist lenders or factoring companies to help you overcome any cash flow issues.
UNSECURED BUSINESS LOANS
Unsecured business loans are loans that are approved without any collateral security needing to be provided. However, it’s important to understand that these types of loans have higher interest rates than secured loans.
BUSINESS CREDIT CARDS
Business credit cards are another cash flow financing option, though they can have high-interest rates.
Key Cash Flow Financing Considerations
The most appropriate cash flow investment option for your business will depend on your financial circumstances. For example, whether:
- You have ongoing cash flow financing needs (where a line of credit, overdraft facility or business credit card may be suitable options)
- Your needs are one-off (where an unsecured business loan may be an option)
- You have a significant number of debtors (and invoice financing is an option)
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It will also depend on the cost of the financing option (which includes the interest rate plus any other fees or charges). It’s also important to consider whether your business has genuine cash flow problems and is otherwise viable and profitable if you can obtain cash flow finance.
If your business isn’t profitable, cash flow financing won’t be an ongoing solution. You will just temporarily mask deeper financial problems and get your business deeper into debt.
How We Can Help
Choosing the most appropriate cash flow finance option for your business is a crucial decision if you have cash flow issues.
At ARG Finance, our experienced team of asset finance brokers can help you to find the right cash flow financing solution from trusted business cash flow lenders. We’ll take the time to understand your needs before recommending cash flow finance solutions for your business.
Contact us today to find out how business cash flow finance can help you overcome cash flow issues you may have with your business.
Frequently Asked Questions
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Cash flow in finance is a crucial metric for assessing financial health and operational efficiency. Positive cash flow indicates more money is coming in than going out, enabling growth and debt management. Negative cash flow signifies potential liquidity challenges. Monitoring cash flow assists with budgeting, investment decisions and ensuring ongoing financial stability.
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