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Business Loans to help cash flow

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EvianBaby | 11:52 Mon 28th May 2012 | Business & Finance
13 Answers
My company is within the construction which has been suffering a lot lately and as a result, our cashflow is frankly awful.

Business is picking up a little now but we're really struggling to keep on top of payments due as we've had a few very poor months income wise and we're waiting over 90 days in most cases to receive payments ourselves.

I was thinking about the prospects of getting some sort of loan to help ease our cash flow situation until we start seeing the benegfits of a busier period.

Does anyone know much about this sort of thing? Are banks lending at the moment and what sort of amounts? Is it worth taking out and paying interest on a loan or is it more advisable to just keep struggling along?


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As an alternative to this, going forward, have you considered invoice factoring? Basically, you farm out all your invoices to a third-party factoring company who absorb their cost for a percentage of the invoice value. Obviously, each invoice you raise nets you less money, but the factoring company will pay them pretty much instantaneously.
Evian I would contact your bank, however you must go with a business plan showing how you will spend the money and how you expect to recoup the loan.

I am not sure they will just give you money to cover shortfalls, but unless you ask etc.. Good Luck
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I know of that system Mark, a few of our suppliers use it and I can certainly see the benefits however I don't think my Directors would go for it. We have long standing, close relationships with most of our customers and I think they'd prefer to keep things on a personal level. I on the other hand would love someone else to take the stress away of making sure we get payments in on time.

Thanks Dave. I was hoping to get some impartial advice or experience from here before I head off to the bank who will no doubt try to sell us something, whether it be beneficial to us or not.
Hi Evianbaby. My husband and I used factoring in the 90's and I can definitely say that they helped our cashflow problems greatly.

You say you have a personal relationship with your customers, but it is these customers who are taking 90 days to pay you. No small business can cope with that and factoring would solve your problem.

We had to stop factoring because our customers were the likes of Bovis and Charles Church. Large companies are not geared up to the strains of factoring.

In your case I think it's a very good idea.
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Thanks for the answer Chrissa.

Maybe I'll dig out some more info on factoring and once I've done some homwork if I think it will help I'll propose the idea to the bosses. We do do a fair amount of work for big companies like Mitie and McAlpine Grant so I'm not sure they would be able to work with that, as you say - although those two examples are good payers anyway.
If I remember correctly, I think you can designate customers who you don't "factor"... I think.
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hhhmm, well I just said to one of my Directors, 'are you aware of factoring?' and his response was 'yeah, and we're not f***ing touching it'.

That's that idea out the window then.
> we're waiting over 90 days in most cases to receive payments ourselves

No bank will lend you money if you tell them the reason you need it is that your credit control is poor. Instead, they will try to sell you their factoring service!

The real answer to your problems is to improve your own credit control. Credit control is definitely a skill. You may be able to get Gov funding for a credit control training course.
Have you considered refinancing assets that are owned by the business? As an independent financier, I often help businesses by providing cash tied up in plant, machinery, vehicles etc. This can either be done on a very short term basis (a bit like bridging finance) whilst another solution is being sought, or on a straight forward loan-type basis, with repayments over 3 or 4 years. The banks are still a closed-shop (despite the yarn they sell to the Government and the media). I agree with previous posts that Factoring would be a sensible option to explore, but if your Directors feel that the product has a stigma attached, then there is a 'half-way house' product that is undisclosed to your customers. Not sure if this is allowed, so apologies to Answerbank if this contravenes rules, but feel free to ring me on 0 7 9 7 1 9 1 9 5 7 3 if you want to discuss it further. Kind regards.
Why are you on 90 days?
And factoring, if you have a good relationship with your bank, can be a god save. Our bank (Barclays) agreed to just factor our biggest customers, and they were on 28 days.
Question Author
We don't have much in the way of assests really. We don't manufacture so there's no substantial equipment and our premises are rented. We've got 4 vans - 3 of which are worth less than the pot of pens on my desk.

90 days is not our choice. Neither is 60 come to think of it but the 60 is enforced upon. If we aren't happy with it they'll just take the work somewhere else.

Factoring has been completely dismissed. It's not my choice to make, I just try and persuade them what to do.
As an alternative to factoring have you thought about a merchant cash advance? Not sure if you would be eligible but might be worth looking into. << That's an explanation of how it works

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