Achieving business success can strain your cashflow, but there is an answer
Posted on 11th April 2019 at 15:36
It’s a familiar scenario – a new company’s star begins to rise, it seems like the world is their oyster with more and more orders coming through the door, but to service that they need cash to keep their raw ingredient coming.
It’s at this pivotal moment, transitioning from nothing into something, that too many fail. It’s what Peacock Finance owner Darren Peacock calls the ‘growth trap’, and he has a recommendation up his sleeve that can fill that vital gap and make the difference between success and failure – the little-known option of ‘invoice financing’.
A buoyant business ecosystem
Darren is witnessing a buoyant and optimistic market in the Yorkshire and Humber area, despite wider economic uncertainty, and is increasingly recommending invoice factoring to help the growing band of startups take it to the next level.
“It’s almost like we have our own business ecosystem in this area,” he said.
“We’re still basking in the optimism created by Hull’s City of Culture status and the unique mixture of positive factors that exist here, like low cost, strong transport links, major global investment and extensive regeneration. All of this means the businesses I see – in sectors like haulage, recruitment, manufacturing, modular buildings and engineering – are determined to carry on regardless, ignoring the uncertainty of Brexit, for example.”
Keeping the cash flowing
And such businesses approach Darren for help improving their cash flow for a number of reasons.
“Maybe they’re growing so rapidly they need a cash injection to help them buy enough products and materials to supply what their customers want; perhaps they’ve taken just one order but it’s their biggest ever and they need to purchase a part worth a lot of money, or maybe they offer their customers 60-day terms but need to pay their people every 14. Transport businesses, for example, might allow their clients 65 days to pay but have only 14 days to settle their fuel bill.
“Invoice factoring can be the answer. With banks pulling back on their traditional overdraft facilities since the credit crunch, it has gone from being a last resort to a really popular option, because it provides a cost effective, flexible way of keeping the money flowing.
“Funders are happy to help because they know that invoices owned by reliable, in many cases ‘blue chip’, companies are going to be paid no matter what.”
Benefits of invoice factoring at a glance
It’s available to startups – no need for two years of accounts
Rates can be as low as 2%, plus a ‘facility fee’
Decisions are based on the value of your outstanding invoices and how reliable your debtors are. You could access up to 85% of your outstanding invoice value but you only use and pay interest on what you need
Many offers come with admin
Deals come with insurance too so if a large debtor defaults, you can recoup your costs
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