Perfect your internal cash-flow processes first
According to Sage*, nearly two thirds of the UK’s SMEs have to wait over 60 days or more for payment – crippling for any business. Before you look at how any financial products might help, your first priority must be to have a clear, competitive and practical credit policy that you communicate both internally and to customers.
This should spell out your payment terms and define your internal debt control systems. It could also detail any payment discounts and penalties to speed up cash inflows. Separately, charting your business’s projected cash-flow peaks and troughs over the next 12 months is essential to give you complete clarity on where any issues and spikes lie.
Business Banking Insight – recommendations for SMEs by SMEs
Many SMEs already have well-defined cash-flow policies, but due to the seasonality of business, bad debts or expansion plans they still need additional financial support. So which products are right for your particular need – and which providers are the most recommended by other SMEs?
Business Banking Insight (BBI) is a free and independent website for SMEs. Overseen by HM Treasury, the project is managed by FSB and the British Chambers of Commerce. Every three months BBI interviews thousands of SMEs and then publishes its recommendations – but only on the BBI website. When you’re looking to purchase a new product – or review your existing one – it’s the only independent website that helps SMEs compare and make better-informed financial product decisions in this way.
You'll find SME recommendations for all of the products below on the BBI website. It details results from banks big and small, specialist providers, credit unions, business-only providers and more. Larger names you’ve heard of and ones you haven’t – yet.
Business loans – a lump sum to use today or fuel expansion
Business loans are often well suited to cash-flow or business expansion needs. Traditionally cheaper to run than overdrafts, you borrow a fixed sum over an agreed period, so have visibility going forward. You can choose from fixed or variable rates – and some allow you to repay your loan early. If a loan best suits your need, don’t assume that your business account provider is always the best solution. Business Banking Insight reviews a wide range of loan providers, showing those most recommended by SMEs.
Asset finance – a flexible way to access new equipment
With asset finance, your small business can secure the cars, plant, computers and wider equipment it requires, only without needing the capital to buy them outright. For a growing SME this can significantly affect your cash-flow. The provider of finance ultimately owns the equipment, then leases it back to you for an agreed monthly sum. Asset finance also allows you to refinance goods you may have already purchased in the same way. Discover most-recommended asset finance providers here.
Invoice finance – releasing cash from your invoices
For many SMEs, late payments are an unacceptable cause of short-term cash-flow issues. Invoice finance is a service that releases cash currently tied up in outstanding customer invoices, helping salaries and immediate costs to be paid. You send your invoices to your chosen invoice finance provider, who then pays you (quickly) an agreed percentage of your invoices – minus their fee. The remaining percentage is returned to you on payment of the invoice. Different providers offer varying terms, payment speed, online portals on your case and service, but Business Banking Insight ranks those providers most recommended by other SMEs, to help you choose the right provider for your sector, geography and company size.
* January 2015 report