Business Lending – The Banks

Small Business Finance Small Business Lending  had never been easy and since 2008 when the ‘credit crunch’ hit Small Business Finance has proven to be even more illusive.

Business finance issues for small firms are not going away anytime soon, with the banks and other lenders looking to lend less what are the options for small firms.

Having spent a good deal of time considering the options for business finance and having spent time with our own clients and at networking meetings across the South East I can summarise where I think the problems (if that’s the right word) are.

The need for borrowing is often caused by many other issues which should be sorted an organised.

Problems Outside of your control.

These problems are countless, the include the state of the economy, the high cost of insurance, taxes, red tape, health & safety, lack of available credit, competition, transport issues, employee skills gaps and shortages, and the list just goes on.

Let me surprise you, these problems are not new. As a business owner you have to find a way to get over these, work around them (have you seen the film “A Bugs life” – when the ants get stopped by the falling leaf, and the head Ant shouts “we are going around the leaf”). Whatever you do you must find a way. Scroll two minutes in.

 

Problems within the business.

Staff, vehicles, software, you name it there are loads of distractions on day to day basis. It seems that these always get sorted out after 5pm and even earlier on a Friday. To be alive is to have problems, the key is your reaction to them. Of course delegate where you can, analyse how you can prevent it from happening again and put in place some plans. But do something! Running in all guns blazing is not going to solve the problem long term.

Cash

Get and manage the cash flow.  It’s great when the Accountant pops your figures in the end of the year and you can see that you have a fantastically strong balance sheet, only you can pay staff or put fuel in the vans with it. You need cash for what you spend.

But It’s hard to get and there is never enough. If you are a fast growing firm  you can rapidly outgrow your available sources, if you are an underperforming company you can’t get  much of it at all.

The vast majority of companies don’t manage it well. Overdrafts, credit cards and leasing/hire purchase are all helpful to preserve some of that illusive cash flow but often just defer the problems. There are also other sources of funding like factoring and invoice discounting, loans from friends and family and new equity but what do choose, not easy decisions when you can’t meet the wage bill.

Commercial loans, grants and overdraft had become substantially harder to obtain for a significant minority of businesses and these are getting no easier.

Most businesses experience some problems getting paid on time by their customers and with debt recovery. Good credit control helps to prevent this becoming a serious problem.

Why management time is not spent on chasing up these later payers  I don’t know, you will be surprised what can be resolved by just spending some time on it. Recently I gave a list of our clients debtors to one of our staff to sort out, and just the different voice made a difference. Honestly if you want to try it give me a call and we will make a plan.

Six out of ten of small firms have a bad/or at least worsening credit rating, according to credit reference agency Graydon UK. Having a good credit score is not only important to enable you to borrow funds, but will also affect your ability to secure good terms on trade credit.

Lack of a clear plan

Most businesses don’t know how to plan or they do then not all of the team is told. Lack of a plan worsens  cash problems by wasting cash chasing tempting diversions, and throwing money at problems.

Changing a plan is also very helpful of only some of you would do it.

Sales/marketing effectiveness

Many businesses have not taken the time to decide what their USP is. They try to compete in conflicting areas, such as lowest price and highest service and it’s not possible to do both, really.

One takes away money and the other adds cost.

Part of the planning process for a new product should include a very clear answer to one simple question, “with all of the products and service available to my customers why should they buy from me?”. Honestly have you ever asked this question?

Lack of execution

Do you have any of these.

  • strategies that are developed and never executed
  • improvement projects fail
  • leaders spend less that 1-hour per month on strategy
  • employees don’t know their company’s strategy.
  • organisations don’t have meaningful performance measurements in place or carry out regular performance analysis.

Provided you are focusing on some of these and getting them right you should not have any major need to borrow. I guess that this kind of explains why so many small firms are.

If you need some help you can contact me using this page contact  or you can call. There is some further information here Business Finance Solutions