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Cash Flow Finance | 8 Options Compared
At Clifton Private Finance, we’ve supported a wide range of businesses through financial difficulties, help keeping them on top of day-to-day expenses to make sure everything runs as smoothly as possible.
One of the main tools for doing so is cash flow finance, a range of funding products that are tailored specifically for short-term business finance management.
What is cash flow finance, how can it help your business, and what are the most popular types?
Cash Flow Finance in a Nutshell
Cash flow finance is not one product - it’s an umbrella term for a wide range of loans, lines of credit, and finance arrangements that help smooth the monthly burden of running a company.
Of course, money is money, and some of the best cash flow finance products will release the pressure on your business capital, allowing you to use it as you should - by building the business.
In this way, this suite of specialised funding solutions can provide innovative and valuable ways to overcome most business needs, making it one of the more powerful funding solutions available to UK businesses.
Cash flow finance:
- Provides cash at short notice to cover immediate needs, such as paying salaries, meeting pressing debt liabilities, ensuring utility bills and other obligations are paid on time, taking advantage of unexpected opportunities, or smoothing the difficulties of seasonal trade.
- Is a short-term finance solution, often repaid within 12 months.
- Covers a range of products, each designed to solve a specific problem or meet a specific need.
- Is available for businesses of any size.
When it comes to getting the right cash flow finance for your business, the smart choice is to speak to Clifton Private Finance.
Our specialists spend all day, every day, scouring the UK marketplace for the very best cash flow finance products, and can help you get the best deals possible. If you’re considering cash flow finance for your business, give us a call today or check your eligibility below.
Cash Flow Finance to Cover Bills - 3 Examples
There’s a point in every business’s life - even the most successful ones - when it looks like you’re not going to get through the next month or two. Every company’s finances ebb and flow, and it’s for this reason that cash flow finance exists.
Consider the three following scenarios for example:
IT Support Business
You’re a small business with ten employees, providing IT support services for similar-sized businesses that are too small to have their own dedicated IT teams.
One month, a major client you typically rely on has a cash flow problem of their own and fails to pay an important invoice on time asking if you’ll provide them an extension for another month, which of course you do; a week later, an expected new lead dies into nothing with more money you were expecting to come in failing to do so.
Cash flow finance can provide that £10,000 as a secured loan, leveraged against existing business assets such as vehicles or equipment, or even as invoice finance tied to the outstanding invoice payments expected from your clients. With a rapid application process, money can be in your bank to cover the salaries of your loyal employees within 48 hours.
Restaurant
Or perhaps you’re a restaurant in a busy tourist spot. Business is always highest in the summer, and slumps during September and October, before picking up once more around Christmas, followed by a quiet January and February before the spring brings in a more regular customer base.
Cash flow finance can help. Here, you turn to merchant cash advance, a form of cash flow finance that uses your historical card transaction figures to forecast future sales and provides you with cash today based on the expected income of tomorrow.
With an extremely flexible repayment schedule that’s set as a percentage of your takings when the business builds back up, it’s easy to manage and sees you through the difficult winter months, easily repaid through a bustling tourist summer.
Service Enterprise
What about the larger service-based corporation that finds themselves confronting an unexpectedly large corporation tax liability thanks to some poor accounting?
The guilty parties have been laid off, but that doesn’t stop you having to find money today to pay HMRC.
Thankfully, with some strong assets to use as collateral, you’re able to obtain a substantial corporation tax loan that spreads the cost of the essential payment across the next twelve months at an impressively low interest rate. Once more, the flexibility of this specialist funding saves the day.
Cash Flow Finance to Grab Opportunities - 4 Examples
In addition to helping businesses weather the storm of unpredictable finance, cash flow finance ensures you never miss opportunities to propel your business forward.
With the right financial tools you can take advantage of situations, including examples such as:
Products you can sell on for profit are available in a short-term sale from suppliers.
It’s not unusual for items to be offered at a cut price for a limited time, but if you don’t have the money ready to take advantage of the deal, then you can watch a potentially lucrative opportunity slip away.
Stock finance (or inventory finance) is a form of cash flow finance that provides immediate backing at short notice to buy up a reasonable amount of the goods. With the confidence that you can move them over time to pay back the loan and any interest or fees and still make a sizeable profit - as well as growing your customer base.
A company in a similar area to your own is liquidated, leading to a flash sale of their assets which you could easily use.
While liquidation is unfortunate, it does happen, and taking advantage of the liquidator’s desire to sell on assets and recoup monies as quickly as possible can be a huge opportunity for growth.
Whether it’s stock, equipment, or even contracts with clients, being able to step in and snap up the things that you can use will give your own business a huge boost. Funding products like asset refinance can give you the purchasing power to do just that, setting your own company on a strong path for future expansion and stability.
A new client or project can be secured - only you currently lack the resources to take it on.
Often a problem for businesses looking to grow is the need to have the personnel and equipment to undertake a project ready to go, while knowing that the income from that deal might be months away from fruition.
How do you pay salaries and buy the kit that’s needed to get the job done without the money to do so? PO finance and asset-based lines of credit are types of cash flow finance that can smooth the investment over months, giving you the support you need to meet salaries, obtain stock, and upgrade equipment.
Long term financing is available but takes too long to put in place.
An issue that’s especially relevant to the property market is one where more efficient long-term financing (such as a commercial mortgage) would be more suitable, but the administration to get it is too slow to take advantage of the opportunity.
Cash flow finance in the form of business bridging loans for property developers provides you with the short-term financing you need, designed to be replaced with stable long-term funding as part of an exit strategy.
More business finance case studies:
8 Cash Flow Finance Products Compared
As seen, the specialised nature of cash flow finance provides businesses with a wide range of tailored products to support and smooth income and outgoings. 8 of the key products include:
Stock / Inventory Finance
Using the value of either existing stock or goods to be purchased with the finance as collateral, stock finance smooths cash flow by releasing money tied up in sizeable inventories.
For businesses involved in substantial stock purchases and mid- to long-term warehousing, our range of stock finance and warehouse finance articles offer expert advice and understanding.
Invoice Finance
Itself an umbrella term for a range of powerful products, invoice finance provides B2B businesses with a solution that bridges the gap between an invoice being issued and its eventual payment.
Look to our comprehensive articles on invoice finance, invoice factoring, and invoice discounting to learn more.
Purchase Order Finance
Similar to invoice finance but developed to take place earlier in the supply chain, purchase order finance provides businesses with the funds needed to fulfil an order through loans that are secured by the existence of a reliable official PO.
With credit terms that take into account the customer’s status, large sums can be obtained to help manage cash flow throughout the order’s process and delivery.
Merchant Cash Advance
Providing rapid and flexible cash flow funding for B2C businesses that deal in a large number of debit and credit card transactions, merchant cash advance has a flexible repayment process that is tied to a percentage of future income, meaning that not only does it help stabilise cash flow in the immediate term, it also promises not to put pressure on it in the future.
Bridging Loans
For larger cash flow finance sums, business bridging loans are available to provide swift funding for projects that have a clear future exit strategy - whether that be by being replaced with alternative long-term finance, or through a ‘flip’ type rapid-profit project, with assets being bought, improved, and sold in quick succession.
Asset Refinance
There’s no need to struggle while you have equity in existing assets.
This is a system whereby the item is effectively sold to a third-party financier, and leased back for continued use to the business; providing funds today to solve immediate cash flow issues.
Learn about asset refinance here.
Revolving Credit Facilities
One of the greatest flexibilities with many cash flow finance options lies with the ability to structure it either as an immediate lump sum loan, or an ongoing revolving credit facility, which the business can dip in and out of as needed.
By obtaining a business revolving credit facility, a guaranteed level of cash flow support is opened up for continued use, giving instant access to additional funds whenever required.
Secured Loans
Secured business loans or asset-based loans form the backbone of many types of cash flow finance. In their purest form, however, specialist secured loans can be configured to take advantage of multiple different assets for a more significant level of credit and larger financial boost.
Apply for Cash Flow Finance with Clifton Private Finance
Our expert cash flow funding team can obtain the best deals for your cash flow needs, leaning on their established relationships with lenders as well as an encyclopaedic knowledge of the impressive UK funding marketplace.
With Clifton Private Finance, there’s no need to spend hours scouring the internet in the hope of finding a finance package that will help.
Speak to a Clifton Private Finance advisor today.
