A challenge for many growing businesses is getting access to finance when they need it to adapt to fast-changing requirements. Traditional business loans require large amounts of paperwork and can take six to eight weeks to get approved.
In the current tightening climate, access to finance is getting harder and more expensive. This is especially true for newer businesses who do not have sufficient trading history that banks are comfortable lending to. As a result, more and more FMCG businesses are looking for finance sources that enable them to adapt quickly.
Winning distribution agreements with large retailers create growing pains. As demand grows quickly, pressures on cash flow increase. This means that cash flow is critical to recycle back into the business so the business can order more products, packaging and cover increasing wages.
With invoice finance, it is possible to unlock faster cash flow that supports the rapid scaling of business operations. That is because invoice finance treats invoices as assets, which is how they appear on the balance sheet. So many entrepreneurs forget that invoices are assets that can be borrowed against. Invoice finance companies are used to partnering with growing companies.
Here are a few ways small-to-medium FMCG businesses – including manufacturers, wholesalers, distributors and retailers – can benefit from invoice finance.
● Unlike an overdraft or loan, your invoice finance facility grows with the value of invoices issued. This makes it possible for rapid growth as the business access to cash flow scales with business growth.
● Growth often requires bringing in new employees. Having access to steady cash flow is the first step in having the confidence to offer employment. Knowing that cash flow won’t be an issue allows the business to recruit the best talent for the job.
● Seasonality and inventory management often play havoc with cash flow. When customers delay payments, it creates a snowball effect on cash flow. Unlocking the power of your unpaid invoices enables the business to purchase inventory when the business needs and secures the most favourable terms.
● With invoice finance, interest is only charged for the period that funds are borrowed. It is this flexibility and control that makes invoice finance the smart choice for growing FMCG businesses.
How do you go about setting up an invoice finance facility?
With modern accounting platforms like XERO, performing the analysis to determine what kind of cash flow solution works best for the business is easy. A simple extract, uploaded to Lock Finance’s finance platform allows for rapid analysis.
The team at Lock Finance work with the business owner and accountant to structure a cash flow solution that helps the business meet its payroll, supplier, tax and growth requirements. Each solution is tailored to the specific business needs, including advice on how to manage accounts receivables and supplier payment so that the business is securing the best trade terms possible.
Most businesses forget that their invoices are actually assets. Unlock the power of your unpaid invoices, and speed up cash flow to grow.
Visit www.lockfinance.co.nz to find out more, or head to their LinkedIn and Facebook pages.
