Even if your business is way past the start up stage, you still might find yourself struggling for cash flow from time to time. However, with banks reining back their lending to many small businesses in an attempt to minimise their risk, getting access to new funds can be tricky. So, how can you avoid letting your access to bank funds completely control your cash flow options?
Avoid late payment
Customers paying late and dragging out their debts is a common within the SME sector. Many small businesses struggle with this, not having the resources to properly chase up debts and needing the funds to be released in order to pay staff and bills.
Avoiding late payment can be tricky. Ensure that all your invoices are send out correctly to avoid having to amend them, which can lead customers to delay payment further. Offering discounts for early payment can also work – this lets you take advantage of an added incentive for customers to pay as well as being able to keep debt collection as an in-house process.
You could look for investment from outside the banks. Angel investors, for example, are always looking for a good investment. This will not be in the form of a loan, but you’ll need to offer them a piece of your business – but this can be a good way of getting a new venture off the ground without having to rely on banks
If your company issues invoices, then you will be able to make use of invoice discounting or factoring services. These allow you to release up to 90% of the value of the invoice almost immediately, so you won’t be kept hanging around waiting for payment. You’ll need to pay a small lending fee to the factoring lender, but between this and waiting perhaps a period of months for payment, invoice factoring is often a great option.
Even though bank loans and overdrafts may well be your first thought when looking to boost your business cash flow, they’re not the only options out there.