No matter what type of business you run, cash-flow is king. If you’re looking to grow, or get back on your feet again after the pandemic disrupted your business, then you’ll be keen to know that there are a range of options out there for you.

The first step is to understand what type of funding you might need, whether that’s short-term or long-term funding. The cost of borrowing money will vary depending on how long you’re looking to borrow for, so it’s worth understanding the different types of finance available for you before you dip into your commercial overdraft.

Here, we explain the different types of long-term and short term funding available.

Short-term funding: Invoice Finance

Invoice Financing is a form of short-term borrowing designed to help businesses manage their cash flow more effectively. Acting as an alternative to the traditional overdraft, it gives businesses the working capital they need to meet short-term obligations, customer demand and grow at a pace that works for them.

Benefits of Invoice finance:

• It’s low risk and can be offered on a confidential basis
• It’s flexible and helps you free up time
• It supports business growth
• Helps with managing cash flow
• Helps with customer retention
• It’s very flexible

Find out more here >

If you want to know more about Invoice Finance, here’s a few more key facts:

• Anyone can apply for Invoice Finance if they trade with businesses, rather than customers.
• You can qualify as a Limited Company offering industry standard credit terms.
• Turnover ideally needs to be above or predicted to be £100k+
• Start-ups can apply, as can businesses who have been through CVA or insolvency
• You can borrow up to £25,000 through invoice finance.
• Invoice finance can be used in tandem with other bank facilities as it’s secured against the business book debts.

Short term funding: VAT Loans

This is another great short-term cash-flow boosting option for VAT registered businesses who pay their VAT every quarter.  A VAT loan will allow you to pay off your VAT every month in three equal instalments, helping you to keep cash in your business for longer.

A VAT loan is a short-term (ie: 3 month) loan and you are required to pay the capital plus the interest, as you would with any other loan.

If your VAT bill for the quarter ending 31 March 2021 is £60,000, a VAT loan will allow you to pay it back over three equal instalments of £21,000 each.

For more about VAT loans and to see the illustration of how much a VAT loan will cost you:

https://www.tvaf.co.uk/news/how-a-vat-loan-can-help-your-business-to-get-cashflow-fit/

Resident Invoice Finance expert Mark Riches says: “If you’re a VAT registered business and want to keep cash-flow in your business, then you might wish to consider using both Invoice Finance and a quarterly VAT loan together. Combined, both offer business owners the opportunity to free up working capital at a cost-effective rate, essential for businesses where their payment terms have been stretched and where the cost of fuel, gas and electricity are likely to increase operating costs.”

Short-term funding: Overdrafts

An overdraft may be an option worth considering as they are easy to obtain by your High Street Bank if you are a well established business with a strong balance sheet.

They aren’t necessarily the most cost-effective way to raise finances and there may be funding limits depending on your circumstances. It’s also worth noting that an overdraft of over £50,000 will require a personal guarantee and security over either property and/or the business.

Long-term funding options

There are a number of longer-term funding options available for business growth. Our sister company, TVAF Asset Finance & Business Loans provides a range of different business loans. After the government pandemic recovery schemes provided financial support for businesses through the CBIL Scheme, there are now more options available that will open up for you, so it’s worth working with an independent, specialist broker to make sure you’re borrowing money in the right way.

Should I consider the Recovery Loan Scheme?

If you don’t want a personal guarantee, then the Recovery Loan Scheme is a great option for you. As it’s underwritten by the British Business Bank (government owned), they will provide the guarantee of 80% of the loan.

If your loan is over £250k and you have given a personal guarantee, the lender will call in your guarantee first before claiming on the government’s guarantee. In either scenario your business remains 100% liable for the debt.

Our Loans are accredited to provide business finance through the Recovery Loan Scheme and can support your business if you’re looking for working capital or growth and investment.

Is the Recovery Loan Scheme right for you? Find out more on this blog post: https://www.tvaf.co.uk/news/latest-recovery-loan-scheme-changes/

When should I consider Asset Finance for my business?

Asset Finance is a form of lending that allows a business to acquire the assets it needs to operate and grow whilst spreading the cost of the purchase. The finance is generally secured on the asset itself. Assets can include:

•  Coaches and buses
• Construction equipment
• Engineering and manufacturing
• Transport and logistics including light commercial vehicles and vans
• Waste management
• Office fit-out

It’s never been easier to acquire that essential new asset. In order to qualify for asset finance, your new purchase must meet 4 key criteria, known as DIMS. This means the asset must be:

• Durable
• Identifiable
• Moveable
• Saleable

What happens if I can’t secure finance for my business?

Has the bank said no to your request for funds? Maybe you’re a start-up and haven’t got the two years’ trading history that the bank requires? Or, perhaps you’ve had difficulties with your credit history in the past, which mean you’re not eligible for lending via the bank?

Working with an independent asset finance specialist, you’ll open up a range of options, some of which we talk about here:  https://www.tvaf.co.uk/news/finance-lending-options-when-the-bank-says-no/

At Navigate Business Finance, there are lots of different finance options available. If your business needs support, get in touch with our team today for an initial consultation.