Do you really want to put more money into your business?
Ever since the uncertainty of Brexit raised its’ head, there has been a growing trend amongst SMEs to fund requirements from cash reserves. When these are exhausted, the personal support of the owners has often been relied on as a temporary measure until the economy settles down.
Yet, in the last quarter of 2018, the Bank of England raised concerns that a hard Brexit may lead to further increases of the base rate.
As this uncertainty over Brexit continues, it is clear the personal support of owners will be stretched further. Demand will increase on higher personal payments on mortgages, credit cards and other loans if the base rate rises again. And if this does happen, SMEs will be under pressure from both sides.
SME owners worried about the scenario of base rate rises should look to assess what may be the situation.
Calculate what impact a rise of 0.25% or 0.5% would have on repayment costs
This is done simply. Add all lending on variable rates and see how much a rate rise could increase the total repayments. There are several finance websites which have useful calculators to do this. And don’t forget, any impact of even a 0.25% increase in base rate may appear to be a minor on one funding facility. But, when adding up the impact on several it may have a more significant effect on cash.
Review business costs and income
Remove unnecessary expenses and ‘luxuries’ that have become a feature of the business. Review income streams. Has a culture of undercharging been established for aspects of the business? Or have the ‘special offers’ run their course?
Explore finance options to put more money into your business
This is common sense. Why not use the assets of the business?
Gone are the times an SME looked first to High Street banks for their financial support. Since the ‘credit crunch’ this traditional source has become difficult to access. Traditional methods of funding have been generally removed (overdrafts) or increased security required (loans). But, for an SME there are several alternative sources of good funding to enquire about. These will use the assets of the business to raise funds, without relying on the pockets of the owner. And will not always need pre-set criteria meeting before a lending decision is made.
- Invoice Finance can put more money into your business by funding against book debts.
- Trade Finance can pay suppliers for goods bought from them.
- Asset Finance can release equity in the assets of a business.
- Short-term loans are also available to put more money into your business and meet an urgent funding gap … and they are normally agreed within a few days.
In summary, Brexit uncertainty, lack of clarity over interest rates and general business costs are all a growing concern for any SME. So, now is the time to review funding for a business – without impacting on the personal wealth of the owners.
Don’t leave it too late, find a finance partner who can work with you and your business to put more money into your business when you need it.
Straight talking advice on financial planning for your business
Have you any questions?
Here at Yorkshire Powerhouse, we’re happy to help as much as possible – is there anything else we can do to help you, do you have any further questions or can we help introduce you to an expert – please let us know: