4 reasons your business finance is crippling your cash flow
You don’t need us to tell you how important cash flow is to your business. Without proper liquidity, your business could be stuck on a downward spiral that lead to all kinds of unpleasant outcomes. It can prevent bills from getting paid, it can sour your relationships with your vendors. It can cause you to rack up late payment fees and other charges. It may even require you to take out more business finance like a bridging loan to help you to keep costs covered while you wait out the storm. However, in these difficult times, we’ve all had to make huge operational changes in order to survive. We’ve had to engage employees remotely and help them grapple with productivity issues. We’ve had to coax customers out of hiding and convince them to re-engage with your brand. We’ve had to change the products and services we offer to better suit their changing needs.
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And all of that costs money. Just make sure your business finance is helping you solve your cash flow crises rather than contributing to them. Here we’ll look at some of the reasons why your business finance could be crippling your cash flow…
You’ve gone with the first lender to say “yes”
When you’re trying to get a startup off the ground, it can be extremely frustrating when lender after lender slams the door in your face. And when a lender finally gives you the green light you might (quite understandably) want to bite their metaphorical hand off.
However, you should be wary of jumping on board with the first lender who says “yes”. Make sure that there aren’t caveats like higher interest rates or unreasonable terms. In fact, did you known that if a lender turns you down for a business loan, they’re legally obliged to suggest alternative options? Make sure you know all your available options before you commit to any lender.
You’ve not checked what grants and benefits you’re entitled to
Commercial loans are by no means your only means of funding your operation. Especially if you work in the sciences or commit to research and development that may further innovation in your field. Make sure you check your entitlement for benefits and tax credits such as Research and Development Tax Relief. After all, what business can afford to turn down free money?
You’ve borrowed more than you need
“Just in case” can be perilous words when it comes to financing your business. Yes, you want to be able to invest in an infrastructure for operational excellence. At the same time, however, you should be wary of borrowing more than you really need. Every pound you borrow comes with interest that you will need to spend months or even years working off.
You haven’t considered other ways to improve working capital
Finally, don’t assume that borrowing is the only way you can improve working capital. Even in these uncertain times. Selling long term assets, throwing a quick sale, upselling to improve your value-added and delivering targeted deals to existing customers can all give you a boost in capital without needing to borrow a penny.
