Cash Flow Advice for Women in Business
In difficult times it can be hard to raise cash. Business finance is often secured against property, but a downturn in property prices means it may not be possible to secure additional finance this way. Late payment can be more of a problem too, and sales may be sluggish. So, the business could find that it is nearing its overdraft limit.
If that happens, where can businesses turn? One way to free up capital (and remove a few headaches) is to raise finance from your business’s assets through asset finance. The same applies to businesses that need to acquire and finance new assets to remain competitive: they can finance using those assets as security.
One thing known from experience is that some businesses leave re-arranging their finances until they have run out of cash. It is vital to look at how they finance the business well before that. Many rely on overdrafts and loans when there are alternatives out there that suit them better. Think of it like this: business assets depreciate over time. Vehicles, plant machinery and IT equipment all depreciate – so why buy them outright?
Cash is the lifeblood of every business. Buying outright may mean you are using up valuable resources that could be invested elsewhere. It also means you may not be able to spread the cost. With asset finance the security is the asset itself, so you can use your property to secure finance for other aspects of your business or even keep it in reserve – a good idea given the current economic environment.
By using asset finance, the entire cost of rental can be deducted as a business expense. There can also be VAT benefits (depending on the asset and type of finance), as VAT is only paid on the rental – not the entire purchase price. That too can ease cash flow, increase your borrowing power, and relieve you of purchasing and maintenance worries – ultimately saving you money.
Marc Dryden, NatWest Director of Retail and Commercial Bank Development
NatWest Business Sense magazine, Winter 2009 edition.
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