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  • Writer's pictureAshley Van Rosmalen

Why Is Cashflow King for Small Businesses?

Updated: Mar 13, 2023

Cash flow can become a main cause of stress for small business owners. Cash flow is the management and behaviour of incoming and outgoing funds.

While generating revenue is important, having a healthy flow of money to sustain a business in the long term is just as critical. There are great finance solutions for businesses with short-term cash flow challenges.

Funding solutions combined with financial education aim to mitigate the risk of long-term cash flow challenges for any small business.

This article looks at the benefits of cash flow for small businesses and how a financing solution could assist with a cash flow strategy.

F&I Partners | Asset Finance Solutions. What is cash flow finance and how can it benefit your small business?

What Is Cash Flow Finance?

Cash flow finance helps small businesses manage their cash flow with fast access to finance to meet short-term challenges and have flexible repayment terms. For example, a business can borrow against unpaid invoices or other assets.

Cash flow finance is a popular option for small businesses to help bridge the gap until they are able to generate more revenue.

Depending on the industry and operations, there are tailored solutions to suit the nuance of each challenge.

What Loan Options Suit Cash Flow Challenges?

The types of cash flow finance available for small businesses include:

  1. Invoice financing: Invoice financing allows small businesses to borrow against unpaid invoices. This is not always the full amount of outstanding invoices but often up to 80% of the total sum owed. Once the customer invoices are paid, you can repay the invoice finance loan.

  2. Merchant cash advances: Merchant cash advances are for businesses with high volumes of credit card sales, and the funding is a percentage of future expected sales. This type of cashflow finance is common in industries such as retail stores, e-commerce and hospitality.

  3. Asset-based lending enables businesses to borrow funds from a lender against their assets, such as inventory or equipment. You can have a fixed term to repay the funds over, and it is secured to the equipment or assets till the borrowed funding is paid back.

F&I Partners | Asset Finance Solutions. What is cash flow finance and how can it help your business?

Benefits of Cash Flow Finance

The benefits that small businesses experience from accessing cash flow finance are:

  1. Improved cash flow: Cash flow finance is an immediate solution to a short-term challenge, which will enable them to continue operating until they have improved revenue.

  2. Flexible Solutions: It is a very tailored and industry-specific solution, so the terms are often flexible as that is of high importance when this form of funding is required. This can be from the funding amount and shorter repayment periods to reduce the interest payable.

  3. Access to funding: The turnaround times lenders aim to disburse these funds are often immediate due to the nature of the need. This is a much faster process than large business loans and equity releases.

  4. Reduced risk: Often, you can achieve lower interest rates and fees for the business. Secured loans are deems a less risky transaction, and the likelihood of the funds being repaid increases.

Cash flow finance can be a valuable tool for small businesses struggling to manage their cash flow.

It is important to remember that cash flow finance is often utilised as a short-term solution and provides you time to mitigate the cause, so you don't experience ongoing cash flow challenges.

The immediate funding can be used for everyday business expenses such as buying inventory and paying supplier or staff wages.

An experienced business finance broker can recommend the most suitable cash flow finance solution.

If you think your business could benefit from accessing cash flow finance, speak to our team today so we can tailor a solution to help your business grow.


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