What are the options when finances are tight?

While the good news is that I am entering my third year running a successful outdoor equipment and clothing shop and sales are on the up, the downside is my finances are struggling to cope with such rapid growth. My loan and overdraft facility are already at their limit and my lender isn’t being particularly flexible. What are my options?

A. David Robertson of Bibby Financial Services:

Rest assured that the days when knocking on the door of the local bank manager to raise funds was your only option are long gone. There are a number of alternative options available. One worth taking a look at is invoice fi nance. Fast becoming a favourite with businesses like yours, invoice fi nance is used by more than 42,000 companies across the UK which are looking for a fl exible source of fi nance that will grow with them.

Operating rather like a fluctuating overdraft, invoice finance takes two forms: invoice discounting and factoring. Invoice discounting provides funding against unpaid invoices so that every time you raise an invoice, the invoice fi nancier will turn up to 85% of the value of that sales invoice into cash within 24 hours of it being raised. This means the business has an ongoing fl ow of cash coming in to pay for overheads and raw materials, as well as being invested in business growth – as opposed to being tied up in overdue invoices. The remaining 15%, less a small service fee, is paid to your business once payment has been received.

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If you’re also finding it hard to keep up with the increasing amount of paperwork and the chasing of invoices while also focusing on sales and growth, you should consider factoring. As well as releasing capital tied-up in invoices a factoring service also includes a full collections service, which is carried out on your behalf. This includes the sending out of statements, making reminder calls and collecting payment from your customers. This service can also be carried out confi dentially, so your customers are unaware of the invoice financiers’ involvement.

Invoice finance provides a flexible source of fi nance by allowing your business to unlock funds tied up in unpaid invoices – leading to an immediate injection of cash.

The key to your success is taking the time to thoroughly research all the options available to you and avoiding the temptation of rushing in to an agreement with the fi rst lender you meet.

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