Working Capital Finance

Working capital is the life blood of every business. We can help you understand your working capital cycle and what finance options are best suited to your business. The time gap between you either purchasing your stock or paying your employees and you getting paid for your product or service can be a long time and drain your cash resources.

Understanding your cashflow cycle, your available working capital and what options are available is crucial to keeping your business operating.

There is a very wide range of financial products and services to assist with cashflow. The most common ones are detailed below. Having spent almost 20 years helping businesses of all industries calculate their working capital cycle, I can help find the right solutions for your business. If you would like to meet up and discuss your business cash flow requirement, contact me now to arrange a time.

1. Credit cards:  Keeping your personal and business credit card purchases separate is a good idea, regardless of whether your business is established as a sole trader, partnership, trust or company. Credit cards generally offer interest free days allowing you to purchase now and repay within a set period without incurring interest. Many cards also offer points and other incentives for the business owner. Credit Cards generally have a far higher rate of interest compared to other loan types. When used correctly they can play an import part in managing your cash flow, however they can easily be used which could result in spending more than you pay back in the interest free period.
2. Term Loans: These are one-time loans with a fixed term and borrowing amount. They can cover general costs or specific expenses like office fit outs or inventory purchases. Term loans can be secured or unsecured. Unsecured facilities typically have higher interest rates. See more details under our growing your business and equipment finance pages.
3. Business Overdraft/Lines of Credit: A business overdraft or line of credit provides longer-term access to a revolving pool of cash. You can draw money multiple times as needed, making it flexible for companies. Interest is only charged on the outstanding balance, but rates can be higher than term loans See more detail on business overdrafts on our growing your business page.
4. Invoice Financing: This option allows businesses to borrow against outstanding invoices. It provides immediate cash flow by advancing funds tied up in unpaid invoices. See more detail below.
5. Trade Finance: If your business imports or exports, you are likely to experience cash flow shortages. Trade finance helps with these cash flow shortages, allowing your business to import or export goods with ease. There are several trade finance options available, including import finance, export finance, payment-in-advance, payment against documents and letters of credit. See more details below.

Invoice finance is a unique business lending facility secured by outstanding invoices. Unlike other types of business lending, there are no asset requirements or interest payments. The loan facility is limited to the size of the invoices. To find out more please call or email me to discuss your situation and if invoice financing is right for your business.

If you are waiting for extended periods for invoices to be paid, and require a consistent source of working capital, invoice financing may be a solution.

There are range of lender in the market, from large banks through to specialists who only offer invoice finance products. There are two key product types: invoice discounting and invoice factoring.

Invoice discounting is where you provide specific invoices for finance. Depending on the lender and the agreement, you will receive an agreed certain percentage of the invoice, usually 80-90%, within 24 -48 hours. The balance of the invoice(s) will be sent to you when the customer pays, less advance fee charged for the service.

Invoice factoring involves the third-party finance company "the factor" purchasing your full invoice book (account receivables), at a reduced amount of the face value (generally 70-85%). Unlike invoice discounting, these contracts often handle all invoicing and debt collection on your behalf. This can minimise your credit risk, however, you can this can also reduce control of your client relationships as the factor – not you – will collect your client money.

Trade finance is a general term for a suite of working capital finance solutions to help businesses involved in importing or exporting. Trade finance helps mitigate risks such as fluctuations in currency or non-payment and ensures smoother transactions for businesses involved in international trade. 

With trade finance, lenders act as intermediaries between the buyer and seller, providing a range of solutions addressing the complications that may arise through international trading. Compared to standard business loans, these facilities generally have more flexible terms, taking into account the peculiarities of domestic and international trade. 

• Import Letter of Credit - An import documentary letter of credit is a formal undertaking by the lender to pay your supplier, provided they meet the terms and conditions of the documentary credit. 
• Export Letter of Credit - An export documentary letter of credit is a document whereby your buyer instructs their bank to pay you, on the basis the agreed conditions contained in the original documentary credit, are met. It is an internationally accepted method of settling trade payments. 

To find out more please call or email me to discuss your situation and if trade financing is right for your business.