Working capital

Working capital is the day to day cash required to ensure that the business can meet its financial obligations as and when they fall due. This may include items such as wages, overheads and stock purchasing.

By regularly reviewing and analysing the working capital cycle, businesses can identify any potential gaps which might occur and put pressure on cashflow. Once these gaps appear, then you can look to plug these with borrowing. There are several methods of borrowing that can be used to support working capital.

We help our clients by identifying potential gaps in their working capital cycle and introducing solutions to these gaps from our network of lenders. Potential working capital solutions can include;

Overdrafts

The simplest form of working capital funding available, a pre-agreed limit with your bank which the business can draw upon when needed. Security will be required to obtain this funding and Overdrafts are typically reviewed every 12 months by the lender. Overdrafts provide the most flexible form of finance for Working Capital, however, security requirements can limit the amount that can be accessed under an Overdraft and inevitably the cash available to your business.

Invoice Finance

Invoice Finance enables your business to unlock working capital tied up within outstanding invoices. Lenders take a charge over the book debts of a business and advance up to 90% of their value on the day the invoices are raised with the balance received once your customer has paid.

Invoice Finance can provide a greater level of funding than an overdraft as the structure provides greater comfort to lenders. Invoice Finance is particularly useful for businesses that are in a growth phase, as lenders use the outstanding invoices as security, they are comfortable in increasing the funding available in line with a growing debtor book.

There are several types of Invoice Finance, varying from a one-off draw down on a single invoice to a full Confidential Invoice Discounting Facility that provides funding against all invoices. There is also the option to include Credit Control and Bad Debt Protection within the facility if appropriate for both the lender and business.

Stock Finance

Trade Finance allows your business to extend credit terms over and above what is offered by your suppliers. Lenders will purchase stock for you from your suppliers and extend your payment terms to between 90-120 days, freeing up cash and potentially allowing your business to negotiate better terms or discounts as they are effectively cash buyers.

This is typically used when importing, however it can be also used for UK suppliers and provides importers, exporters, or both, guarantees of payment.

Merchant Cash Advance

This is available to businesses that take payment via a credit/debit card machine and allows you to borrow a lump sum that is repaid by the lender taking a small percentage of each transaction through the card machine until fully repaid.

Working Capital Loans

A traditional loan, either secured or unsecured that can be injected into the business and repaid over a variety of terms to suit your business needs. It is not unusual to utilise a combination of measures in order to manage working capital in the most efficient way.