Cash Flow Solutions

Cash flow is the lifeblood of all businesses. As any small business owner will know, it is essential to be able to pay the staff, buy supplies/stock and to pay for the myriad other expenses with business finance. The problem comes when cash flow dries up. In most cases, when that happens, the first move should be to talk to the company’s bank. If the company in question has a good track record, a ’solid’ balance sheet and a reasonable order book, then the bank may well be able to respond. For example, the new Enterprise Finance Guarantee scheme under which the Government underwrites 75% of the loan to a business that meets all the criteria is, at last, yielding results, althoug the proportion being rejected is apparently much higher than for previous schemes.

It is when the bank has rejected an application for funds that the problems really begin. It then becomes essential for the business manager to know exactly where and what finance to look for, and how to present the case for funding in the best possible way. It is at this stage that, if the business owner/manager does not have experience in the world of commercial finance, things start to fall apart and business insolvency could follow.

The answer may be to find the best finance company to provide services such as invoice discounting or stock finance. Increasingly, however, the problem is one of escalating debt. In such circumstances the owner/manager will often find themselves spending too much time pacifying creditors and fighting off threats of legal action, whilst at the same time having insufficient capital to do the necessary marketing or even worse being unable to buy sufficient new stock.

Beer & Young Ltd can help by setting up an application for a Customer Voluntary Arrangement (CVA) on behalf of the company. This is a legally constituted agreement whereby the business undertakes to repay all of its creditors (at the time of the agreement) at an agreed rate over an agreed period of time. In return the creditors cannot press for earlier payment of the debt (unless the company defaults on the arrangement).

This action, of itself, can be enough to enable the business to recover. Alternatively, it may be combined with finding an investor to provide a capital boost. Investors are much happier to consider a company where they know that most of their capital will be used for growth and not for paying off old debts.

This article appeared in the Northampton Business Times.