For any business, large or small, maintaining cash is a very important part of day-to-day activity and cannot be ignored. Any interruption in it might lead to problems and will hinder the growth of the business. Cash, as they say is king, and so it needs to be taken care of with great attention.
There are various ways by which a small business can get access to extra cash. These include:
the owners of the business investing more of their own capital;
selling a portion of the equity of the business to other investors;
getting a secured loan from a bank, provided the business has assets that it can use as collateral; or
getting an unsecured loan from a bank or a finance company supported by a personal guarantee from the directors/ owners of the business.
Large publicly listed companies have a number of additional avenues that they can pursue to obtain extra funds:
they can issue debentures to secure debts from the market (both short term or long term); or
they can also raise capital by issuing shares on the stock exchange.
A large enterprise can also get a loan from a bank on the basis of the strength of their balance sheet and the business expects to generate in the coming years and also, on the basis of past statistical data of the company.
This type of loan is unsecured and is known as a cash flow funding. It is different than a loan secured by the assets of the business as it is solely based on the past and the expected future performance of the business. Such financing is very helpful when a large company is planning to acquire another business or merging with another concern.
A number of finance companies in Australia now also offer cash flow funding to small businesses. Because small businesses do not usually have the strength of the balance sheets akin to large enterprises, this is made possible by taking into account the invoices that a small business is able to generate. This type of funding is also known as invoice or debtor financing.
Essentially, any small business that sells goods or services on 30 or 60 day payment terms and has quality customers can obtain immediate cash from a finance company based on the cash flow that the business is expecting to generate from its unpaid invoices. This will ensure that the business can have a steady flow of cash to be able to meet its day-to-day obligations.
Cash finance linked with invoice financing is also beneficial for businesses that would like to take advantage of unique opportunities available in the market. To be able to access funds as required can certainly be the most difficult part of growing the business.
In summary, cash flow finance linked with invoice or debtor finance can provide a small business with fast access to funds to smooth the cash flow bumps allowing the business to operate and grow in the most efficient way.
There are various ways by which a small business can get access to extra cash. These include:
the owners of the business investing more of their own capital;
selling a portion of the equity of the business to other investors;
getting a secured loan from a bank, provided the business has assets that it can use as collateral; or
getting an unsecured loan from a bank or a finance company supported by a personal guarantee from the directors/ owners of the business.
Large publicly listed companies have a number of additional avenues that they can pursue to obtain extra funds:
they can issue debentures to secure debts from the market (both short term or long term); or
they can also raise capital by issuing shares on the stock exchange.
A large enterprise can also get a loan from a bank on the basis of the strength of their balance sheet and the business expects to generate in the coming years and also, on the basis of past statistical data of the company.
This type of loan is unsecured and is known as a cash flow funding. It is different than a loan secured by the assets of the business as it is solely based on the past and the expected future performance of the business. Such financing is very helpful when a large company is planning to acquire another business or merging with another concern.
A number of finance companies in Australia now also offer cash flow funding to small businesses. Because small businesses do not usually have the strength of the balance sheets akin to large enterprises, this is made possible by taking into account the invoices that a small business is able to generate. This type of funding is also known as invoice or debtor financing.
Essentially, any small business that sells goods or services on 30 or 60 day payment terms and has quality customers can obtain immediate cash from a finance company based on the cash flow that the business is expecting to generate from its unpaid invoices. This will ensure that the business can have a steady flow of cash to be able to meet its day-to-day obligations.
Cash finance linked with invoice financing is also beneficial for businesses that would like to take advantage of unique opportunities available in the market. To be able to access funds as required can certainly be the most difficult part of growing the business.
In summary, cash flow finance linked with invoice or debtor finance can provide a small business with fast access to funds to smooth the cash flow bumps allowing the business to operate and grow in the most efficient way.