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Cash is King

Indeed it is. The biggest problem our customers are having at the moment is inflexible factoring or invoice discounting companies, unsupportive banks and collecting cash. These all combined together can potentially have disastrous consequences for any business.  However with some careful planning any potential  cash flow problems can certainly be minimised.

Firstly if there is to be any capital expenditure, where possible this should be purchased via a hire purchase or finance lease facility. In addition it is always advisable to use a third party finance company. If you use your own bank you are potentially utilising finance lines which may be required for non asset investments. Never never buy assets for cash even if cash flow is sufficient. If there is an increase in working capital requirement the cash will be required for cash flow. Also it is so much harder to organise fiance a few months down the line. Finance companies will view this as  refinancing existing equipment exercise, there are far less funders and rates will be much higher.

It also wise to choose your invoice discounting or factoring company wisely I was with one customer this week who regretted going with a main bank. He wished he had gone for the slightly more expensive independent as he would have been certain to have had more cash. In retrospect hindsight is a wonderful thing!

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