Tools to help get the cash flowing.
Despite the severe economic downturn, help is on hand for small businesses seeking alternative funding solutions.
With the recession now in full swing, these are tough times for businesses large and small. However there is help out there for those looking for ways to finance their business, as more and more owners and managers are turning to asset based lending as an alternative to more traditional funding streams.
Asset based lending (ABL) is a financial tool that allows a funder to provide finance against the value of the assets of a business. Kevin Weaver, director of Cashflow UK, specialist advisors on ABL, said “We are operating in unpredictable, uncharted waters. When property value is no longer underpinning lending as it did when commodity prices are rising and lenders are expressing caution, the lifeline sought by businesses is continuity of funding. This will inspire confidence to continue to trade through this difficult cycle.”
ABL facilities are flexible and dynamic as they underpin and grow in line with your business. The most common form of ABL is invoice finance. This is essentially a funding solution which can improve cash flow by releasing the cash tied up in unpaid invoices, providing both an immediate and continuing supply of working capital. This type of funding will typically release funds in outstanding invoices within 24 hours of them being raised.
There are two main products within invoice finance: factoring and invoice discounting.
The former is where you can outsource your credit control function to the finance provider and they professionally collect payments from the customers on your behalf and pass them to you, minus a small percentage. The latter is where you retain the credit control and your customers may or may not know that you are using a facility.
Both these facilities are available with bad debt protection, which ensures payment in the event of a customer insolvency or inability to pay, thus providing added security and peace of mind.
In the current climate of late payments and increasingly speedy settlement demands, many businesses are finding such methods a genuine lifeline to the cash flow of their business, as highlighted by the latest figures released by the Asset Based Finance Association (ABFA), the industry body representing the ABL sector. At the end of 2008 the sector was advancing in excess of £17bn to UK businesses. The industry is now worth £208bn, a growth of nine per cent on last year's figure of £191bn.
If you hadn’t considered this method of financing to help your business, call Cashflow UK for free, impartial advice on 0800 132 156.
