Low cash flow is the situation where there is not enough money available for your business. There are several ways to deal with low cash flow, including bridging finance.
No matter what income is coming into a business, bills still need to be paid and staff expect regular salary payments. If there is not enough money coming in to cover all expenses, the business is in trouble and could be forced to cease trading.
Turning a business around
There are several ways to turn a struggling business around. Costs can be cut, marketing can be made more efficient, suppliers may be prepared to wait for payment. There may be unpaid invoices, and these can be chased up for payment. Most strategies to tackle low cash flow can take a while to be fully effective. A bridging loan can mean that expenses can be paid whilst the company is turning around and becomes more profitable.
Sometimes low cash flow is caused by regional fluctuations in business and is temporary. For example, cinemas are often not very busy on particularly hot summer days but know that their business will increase when the weather gets colder.
Bridging loans are short-term loans, usually for 12 months or less. It helps if your business has a good credit score, though some lenders may provide loans with a less than perfect score. You will need an asset for security. Normally this will be property, but some lenders will consider other assets such as jewellery, antiques and art as long as there is sufficient value in the asset to cover the loan.
An exit strategy must be provided, which is a plan for when and how the loan will be repaid. For low cash flow, a plan for increasing income and reducing expenses must be submitted. This plan must convince the lender that it is practical and that sufficient funds will be available to repay the loan. As a last resort, a lender can repossess the asset if the loan is not repaid. If the security asset is your business premises, this will result in your business being evicted from the property.
Being aware of the consequences of not repaying the loan should not put you off applying for it. It means that your exit strategy must be carefully worked out so that you can easily repay the loan within the time period. If you find that you can repay the loan early, you can save on interest and there will normally be no exit fees.
Talk to Ascot
If your business is short of capital because of low cash flow, talk to Ascot Mortgages about a bridging loan. Our team can advise you on whether bridging finance is the best solution for your business. They can find the best loan deal from amongst the many specialist bridging finance lenders.
A bridging loan could make the difference between ceasing trading and moving on to become a successful business.