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Commercial Finance 4 min read

6 Signs That Your Business May Need Emergency Finance

Matt Haycox
24 February 2020
Written by Matt Haycox

Running a business isn’t always plain sailing.

Sometimes things go wrong, and often these things cost money.

But if you find yourself up against the wall unexpectedly, there is help available. Many emergency finance solutions are available for businesses, each designed to get you through a specific set of circumstances.

This article covers some business emergencies that can occur and details the types of finance that can help you through them.

Here’s what we’ll cover:

  • Six signs that you may have hit a rocky patch.
  • Emergency finance solutions that might help.

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#1: You're operating at a loss

Has it been a while since your business accounts were in the black?

The goal of a business is to turn a profit, but many business owners find themselves in the red. If this is the case, it’s worth looking at the bigger picture.

Have you been struggling along for a while? If so, a business loan could give the cash injection required to get things moving again. This type of borrowing is very general, giving you money to do whatever you need.

If you’re only in the red occasionally, it may be seasonal. In this situation, a business overdraft may be enough to cover your needs, by giving you access to a little extra cash as and when you need it.

#2: Your inventory is stale

Are your products turning less of a profit than they used to?

Trends change, customer tastes evolve, and if you run a business with a lot of inventory, these changes carry risk. Being lumbered with stale stock you can’t shift isn’t just frustrating logistically: Lower inventory turnover saps money from a business quickly.

If you are struggling to shift your current stock, and if this shortfall in cash is hindering your ability to refresh and replenish, you could consider stock finance. This type of borrowing benefits businesses with fast turnaround of high-value stock. A lender purchases stock from a seller on behalf of a business, giving access to inventory you would otherwise have been unable to afford.

#3: Revenue is decreasing

Is your income graph showing a downward trajectory?

If so, you need to assess whether this is within safe parameters. All industries have a seasonal dip. Sometimes you'll be able to spot a quiet period in advance. But if things are declining month-on-month, year-on-year, then perhaps you need to invest and arrest the trend.

A business loan can fund new staff, inventory, vehicles, and more. Tailored asset finance can give you quick access to the latest equipment and machinery to help you get things moving again. Each of these funding solutions has multiple options so that you can choose the one most relevant to your situation.

Also note that it’s essential to understand why cashflow is getting tighter, and take steps beyond borrowing to put things back on the right track.

#4: You're freaking out about a late-paying customer

Is a delayed payment from a high-ticket customer causing you to panic?

If you rely on customers paying on time and in full every month to avoid financial stress, then things could get precarious quickly.

This is especially true if it wasn't always that way. If in the past you had peace of mind, but recently things are starting to feel a little bit tighter, it could be a sign that you need a cash injection to get back on track.

Invoice finance is a popular solution for businesses who want more reliability from the accounts receivable. You borrow against invoices, receiving the cash they represent immediately rather than when your customer feels like paying.

You enjoy a lot of flexibility, too. You can borrow against one invoice, your entire ledger, or anything in between. You can maintain responsibility for collecting payment from your customers, or you can outsource this to your debtor.

Business man having concerns about work

#5: You're already in debt

Is repayment of existing loans dragging you further into debt?

Keeping track of multiple loans - and balancing the interest rates and repayments on each - isn't easy. Business owners with mounting debt may find themselves in a position where they need more debt to consolidate things. This situation is understandably stressful, and you may be feeling the temptation to throw in the towel.

There is light at the end of the tunnel, however. Taking out a large loan to consolidate numerous smaller loans into one easy-to-manage repayment can be a lifesaver.

You can also utilise an asset finance solution that releases the cash stored in your business assets. A sale-and-lease-back arrangement, for example, gives you a cash injection from the sale of a high-cost asset. Rather than selling it entirely, however, you pay a monthly lease to ensure continued usage.

#6: You don't have an emergency fund

Is your business operating with no wiggle room whatsoever?

Although you may not need emergency finance yet, if your entire working capital is tied up in investments and projects, you might do very soon.

Remember the example we gave earlier of a customer deciding to pay an invoice later than usual? Or HMRC issuing a larger tax bill than expected

An emergency fund is an amount of cash set aside for a rainy day. Keeping enough set aside to cover your operating costs for a couple of months gives peace of mind, and reduces the likelihood of you needing emergency finance.

Help is available!

If you do find yourself struggling to make ends meet, give us a bell. We specialise in business finance solutions tailored to the specific needs of each customer, and we’ve helped hundreds of businesses to strengthen their financial situation.

You don’t need to be poring over bank statements and stressing out. The financial future of your business can be brighter.

Originally published 24-Feb-2020 12:45:55, updated February 24 2020

Topics: Commercial Finance

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