Firstly, please let us wish you a healthy and prosperous New Year – it gives us an opportunity to hope for better times ahead, and we can support your company as you navigate through whatever is thrown at you.
The Covid-19 pandemic just presents you with one certainty – that there are no certainties!
We do not know when restrictions will get enforced and/or lifted – or how severe they will be when they are in place. We cannot tell if they will directly close or impact our business until they ‘happen’ to us – or what direct impact they will have on our customers or suppliers – which in turn of course impacts you as well.
Cash flow conservation is not a new concept – plenty of old tricks like chasing your receivables, negotiating your payables, cost cutting to trim the excess from your business costs etc. But this pandemic and its uncertainties have put an additional urgency on ensuring you preserve a level of cash within the business where possible – for whatever is around the next corner, and one certainty is that we are all heading to another corner!
So what could you consider to help you to conserve a level of cash within the business while you still have overheads, delays to banking receivables and expenses related to the business as you adjust or increase your activities to meet the challenges of the times?
For some people this may be just a case of finding out what is available to them in terms of finance products and tools – for others who might have always previously managed their business without the need of finance it might be a bitter pill to swallow, or a ‘last resort’ even.
Our very recent experience shows us that cash flow is the life blood of all of the businesses that we are dealing with, and maintaining a level to get you through this pandemic, or having a sufficient level to enable you to expand your activities and grow, is worth sacrificing a small amount of your margin to cover the cost of financing your business.
As you look at a cash flow forecast for your business, factor in the tools that might be able to help you to conserve your cash flow and spread the cost of all of your outgoings over the months and years ahead; the same tools can also regulate your income to meet outgoings and opportunities as you have them.
We wanted to provide some examples of commercial finance products that can help your business to conserve cash flow and navigate out of the current situation.
Several of these are available until March 31st under CBILS for eligible companies, alongside CBILS business loans, so please talk to us today about the benefits this could provide to your business.
Receivables can Regulate your Cash Flow – Invoice Finance
Invoice Finance may not be the most suitable product for you in every part of the economic cycle – but think of it another way in the current Covid-19 pandemic: what other financial facility will pay you for most of the work that you have completed just a few days after you have completed it, when your customers won’t be settling anything with you for another 60 to 90 days?
Without that immediate cash flow you will have to cover the cost of wages, contractors, overheads, suppliers – and then if you have the opportunity to take on more work or another project, do you have the cash flow to do that now or will it have to wait until your customers settles in the future?
We see this as the clearest demonstration of the ends justifying the cost of the means – many businesses won’t be able to manage without these facilities in the coming economic climate – and we consider Invoice Finance will likely be one of the best cash flow conservation tools available to companies.
Depending on the nature of their business, companies will either buy raw materials that they manufacture or assemble to create finished and saleable goods, or they will purchase ‘finished goods’ from a manufacturer or supplier – packaged and ready for delivery to their customers.
Trade Finance can be with UK based companies as well as overseas – and if it is from overseas, then Trade Finance lenders are also commonly experts in FX as well.
Your business can improve prices and terms from having the backing of a trade facility and being able to pay earlier, and Trade Finance facilities can be flexible to accommodate deposits if required on order and other costs including import VAT and shipping if these are applicable to you.
In the current environment companies need to conserve cash within the business as working capital can become strained without much notice. Funding the acquisition of goods or materials that are either pre-sold or to provide you with stock leaves crucial cash in the business to cover overheads and unexpected demands on the company.
Short Term VAT Loans
One quarter’s VAT bill was able to be deferred to March 2021 under an HMRC scheme, for bills that fell due between 20 March and 30 June 2020.
Instead of paying one lump sum in March 2021, you can now spread the cost of that deferred tax bill over the 2021/22 tax year.
HM Treasury recognised that you need to conserve cash flow in your business, and not have to settle that whole quarter in one payment – but how does that help you with every other subsequent quarterly VAT bill that you face?
We have a lenders offering 12 week loans to help to settle some or all of your VAT bill – you can repay weekly or monthly as suits you best – but the big win for you here is conserving cash by spreading the payments and keeping some liquidity for whatever might come next.
Once set up for one quarter’s bill, the facility can be easily rolled when the next bill arrives – meaning that you don’t have to go through the same level of funding application each time.
Lease or HP Over Buying For Cash?
None of us are going to trade out of this environment by standing still – but when you are looking at new or replacement vehicles for your business, you should conserve cash and use smart finance.
We work with expert partners who can not only source cars and commercial vehicles, but who can source the most suitable Lease or Hire Purchase (HP) deal for your company.
Whether you are looking for New or Used vehicles, a single vehicle or entire fleet – using the right finance for your company in this environment is the smart choice. Conserving cash within your business right now makes sense – none of us know what is around the next corner or when we will need a cash buffer.
Tax efficient, AND better for the environment?? There are a range of CO2 emissions bands, and your business can benefit from an increased offset against profit the lower the CO2 output of your business vehicles. We recommend that you take the advice of your accountant to understand the full benefits available to your company.
I’m sure that you can understand therefore that we have seen a shift away from diesel cars being commonly used for business – we have seen great interest in hybrid and electric models in the last year, and yes, Tesla is very much on the scene as a business car!
Your business may have property or hard / soft assets, or stock, that is unencumbered or with significant equity, that you might consider putting to work to generate much needed cash flow for your business at this time.
We work with Asset Based Lenders who our clients use to access cash that they already have but that is locked up in the existing assets of the business.
Additionally, directors can consider investment properties as a means to access cash flow for their business from the equity that they own – with a caveat that we and our lender partners operate a policy of responsible lending when it comes to residential properties being used to finance businesses.
Lenders have innovated the type of funding available in this space, and it is possible to access ‘business credit facilities’ (much like a business overdraft) with the backing of property assets, as well as vanilla secured loans. These allow flexibility in the amount that the borrower draws down at one time – and you only pay for what you borrow, for the time that you are borrowing it.
R&D Tax Relief Scheme
Consider if you are eligible for Research and Development (R&D) Tax Relief as you think about how to maintain your cash flow while Covid restrictions are extended – many companies would be surprised that they do qualify.
While businesses consider all of their grant and finance options to help them maintain the cash flow that they need to keep their doors open, if you have any thoughts that you might be eligible for the R&D Tax Relief Scheme then NOW is the time to look into that – it could return funds from the last two financial years plus the current one, and that could make all the difference to your company at this critical time.
So what are qualifying activities?
You don’t have to employ ‘men in white coats’ necessarily to be eligible – though you would probably qualify if you did!
Some examples of qualifying activities:
- Projects involving design and/or implementation elements
- Overcoming sector or industry problems in your work
- Achieving your goals by changing processes, materials, design, services or devices
- Your processes show you getting from starting to finishing points in your work
- An element of trial and error to achieve a positive outcome
- Employing technical staff in your business
The R&D Tax scheme is an opportunity for eligible companies to add vital funds and value back into their business at a crucial time for everyone in the UK economy.
If you are uncertain about your eligibility – let us make sure for you!
Essex Commercial Finance are there for the whole journey with clients, and not just the next turning – if you are looking at funding options right now, or would just like to talk over the available options for when you do, why not get in touch today to see how we can help your business?
firstname.lastname@example.org / 07726 195106