Cash flow shortages and how to fund them

Running any business is not for the timid and over the last few years operating in the printing industry has been particularly testing. The list of challenges seems almost endless – the emergence of E-books and digital substitution generally, desk-top publishing which has enabled the world and his dog to produce small printing jobs (albeit of limited quality), the fact that email is easier and cheaper than paper to deliver and the overall impact of the industry on the environment – have all made running a profitable printing business extremely difficult.

And the general business environment has not been easy – strong competition in a market which is only just starting to recover, and a shortage of available finance when you most need it.

We all know that “Cash is King” …or we should. Cash flow is the life source of every business. Whatever the underlying cause, the crunch comes when a business grinds to a halt because of a lack of cash. Surprisingly there are business owners who simply don’t understand the difference between cash flow and profit. The end result can be a company securing a lucrative contract that never reaches fulfilment because cash runs out …and the business fails.

If you run a printing business and picked up a few financial bruises over the past few years, chances are that if you ask the bank to increase the overdraft the answer would be “no”. Or you may receive a huge shopping list of requirements before the bank will even consider its response. The good news is that other lenders are emerging to fill the gap left by the banks.

Numerous alternative lenders and funders have arrived in the market place and more continue to appear. These range from crowd-funders and Peer-to-Peer (P2P) lenders (funded by numerous investors or lenders through the internet), through to specialists who will refinance plant and equipment, long or short term. Some lenders are not visible on the High Street and are only available through intermediaries.

Factoring or confidential invoice discounting is ideal for businesses which supply goods on credit to other businesses. There was a time when any sort of invoice finance was seen as an expensive last resort but the market has matured and it is now seen as acceptable as a consumer paying by credit card.

But there will be occasions when none of those options are available.

As part of a finance and funding package, particularly if you have a profitable business but where the balance sheet is weak, private investors may be prepared to back your company. But if the business is overburdened with historical debt they are likely to be reluctant to pump money into what they think may be a lost cause. It is often in these situations that it may be essential to restructure the business to make the deal attractive to investors. They will generally be looking for a medium term investment, a clear exit route and a share of profit.

If you are running a printing business and have exhausted all potential sources of finance without success and your business is struggling for cash there are other procedures which may enable your business to buy time to weather the storm until business picks up. In this situation you need professional advice, the key is to act quickly to give you as many options as possible.

Please contact us for free advice on any of the topics mentioned above.

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