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Could business funding help your clients manage their cash flow?

As a financial adviser, you’ll already know that good cash flow management is one of the cornerstones of any successful business. You’ll also know that recent events have posed huge challenges for business owners when it comes to managing cash.

Could business funding help your clients manage their cash flow?
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  • Thomas Boyd
  • August 26, 2021
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When times are tough and margins are slim, additional funding can provide businesses with the lifeline they need to recover and start growing again. 

Perhaps your client is experiencing cash flow shortcomings caused by Brexit/Covid-19 supply chain disruptions. Or perhaps lengthy debtor days are creating cash flow gaps.  Whatever the reason, there are a number of finance options out there that can help. 

To determine whether a client could benefit from business funding to manage their cash flow, ask yourself the following questions:

#1: Are they experiencing problems with importing/exporting? 

Ongoing challenges caused by Covid-19 or Brexit could be impacting the way your clients interact with international customers and supply chain partners. Higher shipping costs, new customs procedures and materials shortages are affecting a number of sectors.

Trade finance

Trade finance can provide your clients with the cash injection they need to export goods or purchase inventory. The lender acts as the connector between the supplier and the buyer, and clients can use the finance to trade without requiring a large working capital reserve. 

#2: Are they a supplier in need of a cash flow boost? 

Trade finance is designed to help businesses with cash flow at the start of their supply chain journey. Supply chain finance, on the other hand, helps small suppliers to benefit from the higher credit scores of their buyers. In return, buyers get to lengthen their payment terms. 

Supply chain finance 

Supply chain finance works on the premise that larger, more established firms are likely to honour their suppliers’ (i.e. your clients’) invoices, thus minimising the risk to the lender. 

The lender pays the borrower 100% of the value of the invoice when it’s approved – minus a small fee. Supply chain finance helps business owners to stabilise their cash flow by receiving payment in a few days rather than having to wait for up to 120 days. 

#3: Are they waiting too long for payment?

If your client is struggling to manage their cash flow and they regularly invoice clients, you may want to explore the benefits of invoice finance with them.  

Invoice finance 

If eligible, the business borrower receives up to 80% of the value of their invoices immediately instead of having to wait weeks or even months for payment. 

There are a few options. Invoice discounting is the simplest, as the borrower continues to perform its own credit control. If your client opts for invoice factoring, the lender will chase late payments for them. This can benefit busy business owners who are short on finance staff and low on time. If, say, your client wants to get paid for a single high-value invoice in order to boost cash flow, they can choose selective invoice finance or spot factoring. 

#4: Do they take customer card payments?

The prospect of making repayments can be problematic for SMEs operating in uncertain times, but there are a few flexible finance solutions out there that can help take the pressure off. If your client takes payments, they may be eligible for a merchant cash advance. 

Merchant cash advance

Merchant cash advances allow businesses to access cash quickly. Instead of paying the same amount back each month (including interest), they pay it back through a percentage of their customer card payments, so repayments fluctuate in line with trade – which can be great for seasonal businesses.

One of the benefits of this finance type is that no assets are required as collateral. Businesses can sometimes access a cash advance even if their credit score is limited. 

#5: Do they require funding ‘on tap’?

You may have a client who could benefit from access to capital on a ‘tap in, tap out’ basis, for times when their short-term cash flow is compromised.

Revolving credit facility

Revolving credit facilities are flexible in the sense that they are designed to let businesses withdraw money, spend it, repay it and withdraw it again on a cyclical basis. There’s always a limit to how much can be spent and the lender and borrower agree on repayment terms. 

One of the main benefits of a revolving credit facility is that you only pay for the capital used.

#6: Has their trade been affected by Covid-19?

Do your clients know about the Recovery Loan Scheme (RLS)?

If they require funding for recovery or growth due to the coronavirus pandemic, they could be eligible for finance. The scheme is open until 31 December 2021. Businesses of any size can apply and there’s no limit on turnover. Finance is delivered through the following:

  • Term loans (£25,001–£10 million, up to 6 years)
  • Overdrafts (£25,001–£10 million, up to 3 years)
  • Invoice finance (£1,000–£10 million, up to 3 years)
  • Asset finance (£1,000–£10 million, up to 6 years)

If you have a client who took out CBILS finance, or non-government backed business finance to help them get through the lockdown period, they could move the debt to a longer payment term with reduced monthly repayments by refinancing for an RLS facility.

They need to bear in mind that the interest rate could be higher. However, even if it is and they end up having paid more by the time the finance is paid off, their monthly repayments could be lower, making it easier for them to manage their cash flow.

Join connect today

Funding Options works with businesses and their trusted advisors to secure business finance for cash flow and growth. The team combines its in-depth understanding of the business finance market with technology to find financial solutions that suit individual SMEs. 

If you’d like to benefit from Funding Options’ service, join its advisory platform, Connect, to leverage its expertise and pass the benefits on to your clients. As long as the finance amount your client requires is between £1000 up to £15M, Funding Options can help. 


Thomas Boyd, head of advisory at Funding Options

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