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Solving the Cash Problem

The eternal conundrum for SMEs looking to grow is the availability of cash flow. There’s no growth without cash and there’s no cash without growth. So how are businesses solving this problem, given that one of the most perrenial problems for SMEs is the unavailability of cash flow through late payment from customers?

Aside from the earnings of your company, there are a number of routes that your business could take when looking for additional finance for growth and expansion. Bank loans and overdrafts are the conventional go-to answers, however with the increasingly stringent lending requirements coupled with the banks’ wish to limit their risky debt, this finance option might not be accessible enough.

There are a number of other options, from peer to peer lending to crowd funding, which are becoming more viable through internet platforms. Invoice finance is one such option, letting businesses take advantage of independent specialists who can help them to unlock the capital tied up in unpaid invoices.

For some businesses, however, it’s more of a case of saving up and retaining earnings to fund future growth plans. According to Investec, 79% of entrepreneurs are planning to use this system to fund expansion plans. This means more businesses are trying to become self sufficient, obviously impacted by the change in the bank lending environment.

However, 57% are still planning on relying on bank loans and overdrafts, showing conventional funding is often still top of the agenda. The most popular form of alternative finance was invoice factoring and asset based finance, which 28% were planning on using. This shows an encouraging move away from the established financial institutions, showing that businesses are looking for their best option and acting accordingly.  Invoice finance is predicted to make further gains, demonstrating its potential for the UK SME market.

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