Financing Your Business During the Credit Crunch
The credit crunch has continued to place restrictions on the amount of money banks are willing to lend to their business clients. Day to day operations are impacted on because of decreased cash flow.
Given this scenario, it is possible to think that the outlook for businesses who are trying to raise finance is particularly bleak. However, there are some less well known avenues for raising business finance which businesses may not be aware of. Collectively these are known as business refinancing. The main types of business refinancing are as follows: -
1. Asset Refinancing
This is the process of borrowing against the value of any fixed assets which are owned by the business. For example, if the business has any plant or machinery which it owns outright money can be lent to the business against the value of these assets.
2. Invoice Financing
Invoice financing is the process of raising money based on a company's outstanding invoices. Invoice financing could allow a company to draw down up to 90% of the invoice value immediately on the issue of a valid invoice. The company still has the responsibility for ensuring invoices are paid and paid on time.
3. Trade Finance
If a business brings in a large new order but cash is tight, it might lack the funds to fulfil the order. Trade Finance can enable a business to receive up to 80% of the confirmed order value up front to pay the suppliers required to fulfil the order.
Business refinancing can be a reasonable alternative to more traditional ways of raising business finance. However, businesses are always advised to seek professional advice before making any decisions.
