Starting up and sustaining a company is a tough challenge for even the most gifted of entrepreneurs or the brains behind the business world’s biggest and best ideas. Within that context, the margins for error tend to be slim, particularly when it comes to financial matters and the business of balancing your books.
Here are some of the best options potentially available to you if your company is facing a financial squeeze and is running out of cash, along with some ideas on how to approach the turnaround process.
Short-term business loans
When leading the development of a newly-established company it’s often prudent to have medium and long-term aims in mind but there are times too when short-term solutions to financial problems are required.
There are a growing number of service providers offering specialist solutions in this arena, with companies able to quickly access loans they need on a short term basis. While it remains very important for startup bosses not to rush into borrowing they can’t sustain, short-term loans are increasingly serving a vital function for small firms with big ambitions.
Cash flow loans
Another alternative if cash flows are your prime source of concern as a growing company is to take on what are specifically offered as cash flow loans.
Accessing such facilities will require a solid credit record and demonstrable revenue streams but they can provide invaluable relief to businesses with good prospects and reliable turnover.
It is no secret that traditional forms of lending from banks and other mainstream financial service providers have become difficult for small businesses to access in recent years. As a result, business bank account overdraft facilities have become unavailable to many companies who have a clear need for them.
Into that breach have stepped specialist providers of alternative solutions designed to function precisely as a traditional bank overdraft would be on a standalone basis.
If your company has succeeded in securing good clients but you are being hindered by cash flow concerns then invoice factoring can be a worthwhile way to ease some of those pressures and to access funds upfront.
The process essentially involves selling your invoices to a third party for a fee. In an ideal situation, a fledgling business would be able to wait for their invoices to be paid in full but, when time and immediate access to cash is of the essence, invoice factoring can be a very valuable option.
More invoice finance and factoring resources;
- What exactly are invoice finance and factoring, and what benefits can they bring to my business?
- Compare 50+ lenders for the best factoring solution
Crowdfunding and P2P finance
As a startup company, financial support can be difficult to come by but crowdfunding and peer-to-peer financing have radically broadened the scope for new companies to find financial backing. Both markets have been opened up in large part through advances in internet services and increasingly popular online platforms.
Whether the backing received is in the form of investments or as P2P loans, these new markets are enabling startups to attract interest in their ideas from around the world and to turn enthusiasm into essential financial support.
For full details on crowdfunding and P2P lending, read our dedicated guides;
- How peer-to-peer lending offers startups and businesses a new funding option
- Crowdfunding – a new alternative for small and start-up businesses looking to raise money
- 10 Top tips to ensure your crowdfunding efforts are rewarded
Take a step back
Beyond these specific financial solutions or potential avenues to funding, company bosses who are faced with serious cash flow difficulties can benefit considerably from taking a step back from the crisis situation.
It is vital that business leaders be proactive but that doesn’t mean doing everything or being involved in every decision that’s taken. What matters most is that bosses are able to get the most important decisions right and pursue strategies that stand the best chance of success.
It is often only possible to do this by taking a broader look at the situation and by taking a step back from dealing with day-to-day challenges as they arise.
Sell non-essential assets
If your company is quickly running out of cash and there don’t seem to be any other financial options available then liquidating non-essential assets can help ease some of the pressures you’re facing.
It might not be easy to determine precisely what assets are essential and which are potentially expendable but in a crisis situation these are actions that might have to be taken.
This is particularly the case if insolvency is a real possibility because your assets are likely to be liquidated under these circumstances anyway. But liquidating assets voluntarily can potentially open up much needed financial flexibility at an earlier stage and help ensure that the sale prices secured for your assets are more favourable than they otherwise might be.
End non-essential supplier and employee relationships
Unfortunately, when a company’s future is in danger due to serious financial problems, bosses are left with little choice but to look for savings wherever they can be found. This means that all expenditures need to be scrutinised and the roles being played within a company by employees and supplies will have to be looked at closely.
This can mean ending long-term relationships with reliable suppliers and letting employees go who have done nothing wrong but the reality is that tough choices have to be made.
If the alternative is that your company enters insolvency then there is little that can be done in the longer term under any circumstances to protect your employees or relationships with suppliers whose contributions aren’t integral.
Maintain good communication
Transparency and good communication can be vital in saving a company in financial peril. Directors need to ensure that all stakeholders are as informed as they ought to be every step of the way and that all those involved are pulling in the same direction.
Internal indecision and misinformation can be damaging to the prospects of a company at a time when clear decisions need to be made and specific strategies pursued.
Similarly, creditors have a right to be informed if they cannot be paid in full and an approach based on being upfront is more likely to illicit potentially crucial cooperation between a struggling company and its creditors.
Get good advice where you can find it
Whatever form of financing and rescue strategy you look to pursue if your company is essentially running out of cash, getting advice from independent experts can make a key difference for the better.
There will always be pitfalls to avoid and plenty to consider, which often makes good advice invaluable and third-party guidance well worth seeking out at key moments.
About the author
This guide has been written for ByteStart by Keith Tully of Real Business Rescue, a leading corporate insolvency specialist. He knows what it takes to keep struggling businesses afloat and what qualities are required of company directors.
More cash flow and financing help
You can find help and tips on all aspects of business funding on ByteStart. Here are a few of our popular guides to help your cash flow;
- The way to get paid – 12-Step Action Plan to stop customers from paying you late
- Improve your cash flow – 7 ways to make sure your business gets paid on time, every time
- Collecting overdue payments – a step-by-step guide for small businesses
- 10 late payment excuses used by customers – and how to deal with them
- What to do when a client refuses to pay or can’t pay
And these will help you with other business funding options;
- The secrets of getting a business bank loan
- Don’t waste time trying to raise money! Here’s how to get your customers to fund your business start-up
- What are business angels and how they can help your business?
- 5 things you should know if you want to attract business angels
- Using Research & Development tax relief to reduce your corporation tax bill