You’ll have to excuse the attempt at humour in the title. It seems every day this week the Duke of York has been on the front page of every paper and as I am writing about the main topics in my week I could not resist a nod to this sorry tale.

So this week virtually every client conversation or meeting has had cash on the agenda. This week alone has involved conversations about grants and tax credits as as well as loans and equity investments. I’m not sure why but it’s been almost everywhere I look but it has so it is my topic to discuss as a result. Cash, the importance of it and in very simple terms the funding methods that have ‘crossed my desk’ this week.

We have all heard the phase cash is king. Within a business this is absolute. All too often we discuss profit (or loss) but cash is not only different, it’s significantly more important. I have seen an example very recently where a company had an excellent year in terms of profitability and EBITDA (earnings before interest, tax, depreciation and amortisation) but actually didn’t generate any cash at all. Don’t worry, I’m not going to explain how, that’s another article in itself. You’ll need plenty of coffee for that one. Or a pillow.

So cash. Not profit, not earnings, cash. In hand. In the bank. Wherever. It IS KING. Without cash a business simply stops operating. You can’t pay your staff, your supply chain, can’t invest in opportunities when they arise, you can’t pay your bills. It sounds obvious but if your business is struggling for cash get on it. Fast. And don’t get distracted until it’s solved. The only thing worse than struggling for cash is struggling for cash and not knowing about it until it’s too late. Most businesses should do a cashflow forecast. (I can help with this. Email address at the base of the article). Don’t just do one forecast, update it regularly! Each one is a snapshot, it will be out of date the moment something changes.

So how can you solve a short term cashflow issue ? In very simple terms. I’m assuming here that the timescale does not allow you to simply reduce business costs or charge more for your product / service. That often is a contributor to a lack of cash, but it’s not the only one. Often those changes may be healthy, but they also can take time to take effect. Often they’re a longer term solution, if they’re even possible.

So here are some basic options.

Borrowing. A loan, from a tier one lender (high street bank for example) or other lenders are available. South West Business Finance or Shaw and Co are ones I come across regularly. Links at the base of the article. Many lending organisations have specialisms such as bridging loans to support cashflow, expansion loans, secured or unsecured etc. It’s worth asking around and many businesses will already use external funding and you may be able to get a recommendation from someone you know and respect. An overdraft also fits in this category. You can also borrow from private individuals of course. The downsides? Paying it back of course, and of course the interest they accrue means you pay back more than you borrow. Also you need to consider the implications if you cannot follow the agreed payment schedule. What’s at risk?

Grants. Usually grant funds are not in place to solve cashflow issues but if you’re planning an expansion, or investing in new equipment / technology that would strain / break your cashflow then a grant is a good option. Usually grants look to support growth that contributes more back to the economy so you’ll need to have planned what your expenditure is for, and the growth it’s likely to develop. The downsides? Usually these are matched funding, so you need to put some cash in yourself. You need to apply, which is paperwork and time but this isn’t as daunting as it may seem. There are companies that support applications and will take a lot of this pain away. This week I’ve seen Granted Consultancy Ltd for example. (Link below).

Equity Investment. If you believe in your business, it’s prospects to grow and show a healthy return so may somebody else.  You just need to find them and convince them you are worth an investment. This has been a massive growth area in recent years with the emergence of the FinTech sector and organisations like Crowdcube and GoFundMe for example. You can even attempt ‘crowd funding’ for yourself using PayPal or a Just Giving as a platform for backers to transact. And it’s interest free. There are no monthly payments to make (most of the time), but there are of course still some downsides. Firstly you’re often giving away some of your business (shares) in return for the investment.  Second the investor is expecting a profit, and this is to be realised when they ‘exit’ by selling the shares. You need to be aware of their timescale to do this. Also control. If an investor gives you some cash they may want to have a say in how your business is run to protect their investment. Sometimes this isn’t the case hence the term ‘silent’ partner or investor. Finally be aware the investor may want dividends on their shares which may reduce your own dividend payment.

These are some of the options available in a nutshell. Like most of my Friday reflections this is far from exhaustive, more like scratching the surface. If you require any more information on anything above feel free to get in touch

Useful links: – South West Business Finance – Crowdcube – Granted Consultancy – Shaw and Co – Go Fund Me