talking trade Tackling cashflow challenges
Roger Lownsbrough, director of Anvil Business Advisory, offers tips on managing cashflow
bank. Fill in an application form online, get accepted and away you go. Don’t forget the PG (Personal Guarantee) on the loan though. And, of course, that you have never even met your lender. What could possibly go wrong! All loans, good or bad, have to be repaid and
have a business for long! Your sales might be booming but runaway overheads, late payments and unforeseen debts can all create cashflow problems. So, what to do? For most people the first port of call will be the bank, where you will first have to prove that you don’t need the loan before being considered fit to be given one. If you are fit for a loan, next will follow a guarantee and debenture securing the loan against your business and all things connected to it - as well as a personal guarantee should all not go to plan. How about a Peer-to-Peer (P2P) lender?
M
[Peer-to-Peer lending is the practice of lending money to individuals or businesses through online services that match lenders with borrowers.] This has got to be easier than the
ost people would agree that in business, cashflow is king. It must be true because without it, you won’t
are most likely to come with a guarantee obligation. The key is matching the finance to the purpose. Understanding why is important, because loans can be structured to truly assist the business to move forward in a controlled manner, not gung ho style on the back of being handed a wad of cash. Anvil Business Advisory works with specialist lenders to make sure your loan suits your requirements. Will it involve questions? Yes. However, whereas some lenders are just interested in what assets you have, and what security you can provide for the loan, we are equally interested in you and your business, so we understand your aspirations and how the business works - and by doing that, we can form an understanding of the type of finance you need. You might think you need a lot of cash, when in fact you might need smaller amounts more frequently with some monitoring of the debt ledger to keep borrowing under control, and your personal liability to a minimum. It might be the other way around. But how would anyone know without first learning about your business and your aspirations?
This is a good analogy: a business is going well and wants to expand. They go to a lender and apply for a chunk of borrowing (be honest, there is nothing more glamorous than taking on debt) that they think is required to complete the expansion plans. The loan is approved, they are cock-a-hoop, money’s in the account…who wouldn’t check what the deposit was on that new car? Two years on and the business is still doing well and repayments are up to date. Two years and one day: problem. The main customer has placed their business elsewhere and the cashflow has collapsed overnight. Additional funding is needed to plug the gap. But because the maximum was borrowed in one go the first time around, there isn’t much headroom for a top- up. A smaller loan than is needed is available, but at a higher rate than is workable. It might just bridge the gap while a replacement customer is secured.
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housewareslive.net •
HousewaresLive.net The reality is your back is against the wall,
and you are no longer in control of your borrowing. The higher interest rates will only compound the problem, which is reliant on new business being secured to recover the situation. Too simplistic? Sadly, it can be just that
simple. These are unforeseen trading events that can really put a cat among the pigeons. Having your borrowing properly positioned can help to overcome the unforeseen problems, and reduce the level of your personal liability. Let’s get talking.
• Roger Lownsbrough has spent most of his career in retail sales as a business owner. He enjoyed some years in the cookshop arena, chairing the Cookshop and Housewares Association, and a spell as vice-president of the BHF (British Hardware Federation), now known as Bira (British Independent Retailers Association). Since leaving retail in 2010, he has pursued a
role assisting businesses generally, including those experiencing difficulties. Frequently that boils down to cashflow issues. He says: “It doesn’t really matter what business
you are in, at some point there will be at least one setback or more, and not always at the same or convenient time. Basically, there are two ways to resolve setbacks: either human resource or money. Because the human resource option has an immediate cost, risk and unknown quantity element attached, often the preferred and perceived easier option is to throw money at the problem. Now all you have to do is avoid throwing good money after bad.”
Roger’s contact details are: Anvil Business Advisory Ltd 0781 504 1052
hello@anvilba.co.uk www.anvilba.co.uk
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December 2019
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