The Right Working Capital Strategy

January 20, 2021 | No Comments on The Right Working Capital Strategy

Could a New Working Capital Strategy Help Your Business Thrive in 2022?

Ready for Opportunity: Why Your Business Needs the Right Working Capital Strategy

Last year was a year like no other.

The Covid-19 pandemic hit businesses hard and in many different ways. Some sectors shut down overnight. Others had their busiest ever year. Governments are trying to provide support, but we all know that won’t last forever.

As we move into 2022, we can expect challenging conditions to continue. There will simply be no room left for businesses to hide.

On the other hand, we will see other parts of the economy rebound quickly. There will be huge opportunities available for those businesses that adopt a growth mindset, get organised and are ready to strike.

So, how can you get your business ready?

Businesses need to get their year off to a solid start.

One of the best places to begin is to review your working capital strategy. A new cashflow regime within your business can help unlock the cash you need to invest in new opportunities and long-term productivity growth, without using your personal assets as security.

A key part of that strategy planning is to make sure you’re considering the right financing options. Let’s take a look at what’s available.

Short-Term Loans

A Short-Term Loan is an obvious place to start and a simple option to understand. This type of loan can help you quickly fix a one-off situation, when you have a gap between cash coming in and going out. A common example includes paying tax arrears (staying compliant with tax requirements, but also because a tax debt might prevent you obtaining other types of finance). Other scenarios include paying creditors or other arrears, such as rent.

If you choose the right lender and product, you can have the facility set up within a week. Repayments are usually then made over the next 6 to 18 months.

Invoice Finance

Invoice Finance helps you unlock the value normally tied up in your customer invoices. No more waiting for weeks (or even months!) to get paid. Instead, you invoice your customer, then get immediate access to the cash from your lender.

This can give you a valuable source of easy cashflow. That’s cash that you can put to work whenever you next see an opportunity.

Trade Finance

Do you have suppliers that won’t extend you enough credit? Or will give you big discounts for prompt payment?  Maybe you wish you had longer to pay?

That’s where Trade Finance can assist.

Your lender will pay your supplier for you – in part, or in full. You then pay your lender later – for example, up to 180-day payment terms. That might just give you the time you need.

Asset & Equipment Finance

For your business to perform at its best, investing in the right plant and equipment is crucial. It’s equally important to know you’re choosing the correct funding option to finance those assets.

Considerations here will include the type of asset, its effective life and how you plan to use it. You might need some flexibility to keep or return the equipment. You’ll also have to weigh up factors such as the financing cost, depreciation and GST.

Product options include chattel mortgages, finance leases and hire purchase rental agreements. Each method has its own unique features, advantages and disadvantages. There’s an overwhelming choice, but expert guidance can help.

Where do you start?

Businesses that can move quickly in 2022 will seize the opportunities – and biggest profits. The secret is to plan your strategy, then know what options are available. When the time comes, you’ll be ready.

To get started, simply call us now at PFBS – Australia’s Working Capital experts.

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