If you’re running a small business, one of the biggest problems you face is cash flow. There are many ways to improve the cash flow of your business, and here we look at some of the ways in which you can do that, including:

•     Overdrafts
•     Credit cards
•     Factoring, debtor finance or invoice finance
•     Trade finance or stock finance
•     Car leasing
•     Equipment leasing

Overdrafts – traditional but declining

The original way for businesses to improve cash flow. Convenient and easy to use, however they can also be costly with ongoing fees to maintain the facility and higher interest rates. With more flexible business finance products emerging, overdrafts are becoming a less popular way to address cash flow issues.

Credit cards – expensive money

Credit cards are readily available, simple to use and can also be a good way to finance and monitor employee business expenses. Having said that, they are generally not the most economical way to deal with cash flow problems. Credit card interest rates tend to be much higher than residential home loans (for example), and you can quickly get in over your head. There are other specialised ways to improve your cash flow.

Factoring, debtor finance or invoice discounting

The work is done, the invoice is sent but you don’t have the money. Sounds familiar? When your debtors don’t pay on time, it can be very frustrating.

With factoring (also known as debtor finance, invoice factoring, invoice discounting or invoice finance), a lender advances you a percentage of the invoice (usually up to 80%) in cash, then the remainder when the invoice is paid. Whilst this service incurs a charge, it can really “save your bacon” in terms of cash flow. Ultimately, how you use the funds being provided in advance, will determine the actual cost impact. For example, you may use it to make an early creditor payment and take advantage of a discount.

Beware that if the debtor ultimately does not pay the invoice, you must repay the lender all the money you’ve been advanced.

Trade finance, stock finance, export & import finance

If you’ve bought stock, it can be some time before the finished goods are sold and this can have serious cash flow implications – particularly for importers and exporters.

With trade finance (also known as stock finance, inventory finance, export finance or import finance), the lender gives you a percentage of the money against the stock you’ve purchased. Again, you pay for the service but it can make all the difference in cash flow terms. Lenders are much less inclined to loan money for stock sitting in the warehouse than they are for confirmed orders.

Car leasing & equipment leasing

For many small businesses, leasing cars, computers and equipment is preferable to outright purchase because it improves your cash flow.

Whatever your cash flow needs, Conquer Finance has the expertise to help. Call 1300-513-467 or email info@conquerfinance.com.au