The last 12 months have been a fight for survival for many businesses. Unfortunately, it’s likely that this fight will continue well beyond the relaxation of lockdown rules in the UK. In the world of business, cash has been king for a long time, but it’s likely to be more important than ever before in the near future.
Government support needs to be repaid.
UK Government support has been provided to businesses and has been essential to enable them to continue to trade. It’s important to remember that the support offered, including bounce back loans, CBILS, deferment of VAT, rent and rates, will need to be repaid. This is going to put more pressure on the cash flow of businesses involved.
Cash flow planning is key.
Forward planning is going to be ever more key going forward, especially cash flow planning. The SMEs who are putting their revised numbers together for the next 6 to 12 months will be starting to identify their funding requirements and where those dips are – and how regularly they occur.
How can Trade Finance help me?
There will be businesses who will see their cash flow dip around the need to pay their supplier for goods. In some cases, these same businesses will see previously available credit lines no longer be available to them or be drastically reduced – especially if they deal with overseas suppliers and manufacturers.
In cases where the cash flow hole is created by the need to pay a supplier for goods, this is a scenario where Trade Finance can be the most suitable and powerful solution.
This is achieved by the Trade Finance provider stepping in to the pay the supplier, allowing the goods to be paid for in full, the goods to be shipped and for customer orders to be completed. The proceeds of which will then, in turn, repay the Trade Finance liability – making the whole thing a self-liquidating short terms transactional requirement. This process is unlike a loan which will have a formal repayment profile over an agreed period.
So, as SME businesses start to plan and enter a period of optimism after a difficult time, it is those who can plan their future cash requirements and source the right type of funding solution with the right funding partner who may find they manage the choppy waters ahead better than others.