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This post was written by Conrad Ford, Founder and CEO of Funding Options; an online marketplace for business finance. As part of our Gloucestershire Expertise series, we are giving local leaders the opportunity to share their knowledge and experience, to help other ambitious enterprises grow. If you would like to contribute to the series, please email ross.jukes@thegrowthhub.biz

Conrad shares his advice and experience on the optimal ways for businesses to manage cash flow...

For multinational conglomerates and one-man bands alike, successful cash flow management is crucial. Making sure there’s enough money coming into your business to pay all of the bills is so important because if your outgoings are higher than your income, your business risks becoming insolvent.

There are two ways to improve your business’s cash flow: increase income or decrease outgoings. Simple, right?

Well, no.

There is unfortunately no one-size-fits-all solution to business cash flow woes. All businesses are unique and have their own specific challenges. The good news is that there are several ways businesses can improve their cash flow.

Business loans

Perhaps the most obvious way for a business to bring in some extra cash quickly is to take out a business loan. The main types of business loan are secured and unsecured:

• Secured business loans — this is a loan that’s based on assets owned by your business. If your business can’t repay the loan, the lender has the right to sell the specified asset(s) to recoup the value of the outstanding loan.
• Unsecured business loans — these loans aren’t secured with your business’s assets. With unsecured loans, lenders require other types of reassurance. This can include things like a personal guarantee, which makes a specific person or people liable if the business doesn’t repay the loan.

Generally, secured business loans have lower interest rates than unsecured business loans because there is a solid, tangible security available to the lender if things go wrong — the risk to the lender is lower than if they provide an unsecured business loan.

Refinance or sell business assets

One way to release cash for your business is to refinance or sell assets. This is a really useful source of finance for businesses that own machinery or commercial property. With asset refinancing, a lender will effectively buy a percentage of your asset. You’ll receive a lump sum payment and will make repayments to that lender, and they’ll own their percentage of the asset until you’ve paid off the loan.

Invoice finance

Many businesses carry out work for their customers then send invoices which the customers pay at a later date. This is a well-established way to run a business but can mean that there’s a gap between doing the work and getting paid for it. This is where invoice finance comes in.

With invoice finance, businesses borrow cash based on unpaid customer invoices. The lender will send cash to the business, then the business will repay the lender once the specified invoice has been paid.

Business overdrafts

Business overdrafts are useful for businesses that need some cash quickly or those that can’t always predict when they might need some. Banks have become more reluctant to offer traditional overdrafts to businesses, but happily there are some alternatives to business overdrafts that might help.

Revolving credit facilities

Revolving credit facilities are very similar to business overdrafts. With revolving credit, businesses can get cash up to a pre-approved limit whenever they need it, just like an overdraft. You’ll only pay for the funds you use but there can be setup costs, so make sure you’re aware of the total deal before signing up.

Business credit cards

A lot of businesses use credit cards as a source of working capital. They’re the same as personal credit cards but often have features like expense tracking which is useful to businesses. Just like a business overdraft and a revolving credit facility, you’ll only pay for the cash that you use. Most credit cards have an interest free period during which you can spend and not accrue interest, as long as you pay off the outstanding amount before the period ends.

Many of these options are available through The Growth Hub's Finance Finder tool; built in partnership with Conrad's team at Funding Options. This tool gives you the ability to check eligibility for, and apply directly to, 50 sources of finance and funding for your business. It's part of a suite of new digital business tools, also including:

• Digital Maturity Index (which helps you identify and improve digital capability in your business);
• Productivity Benchmark Tool (which helps you compare your productivity to your competitors).