While small businesses form the backbone of the UK economy, they often find things much tougher than their larger counterparts. A key reason for that struggle is SMEs have more limited access to finance, less capital to play with and frequent cash flow issues.
This feeds a cycle of struggle; according to research, a quarter of SMEs say cash flow problems and lack of access to working capital limits their capacity for growth. This means expansion into new markets could be doomed to failure before it begins. It could mean opportunities to innovate are missed. It can make surviving a change in consumer habits, an uptick in supply chain fees or an economic downturn almost impossible.
If you’re reading this and nodding your head in agreement, you’ll be pleased to know that there is light at the end of the tunnel. After all, 99% of businesses in Britain today are classed as small businesses (those with fewer than 250 employees).
Read on for our Punk-approved strategies for gaining access to capital and surviving cashflow gaps.
Consider alternative finance sources
It’s perhaps no surprise but our best advice for accessing capital if you’re really struggling with high street lenders and other traditional routes is to consider alternative funding sources.
Generally speaking, traditional finance options aren’t designed to meet the ever-changing needs of today’s SMEs. They’re too slow and too bogged down in bureaucracy to react at the pace you need when opportunity comes knocking or the lights are about to get turned off.
Traditional sources of capital such as high street banks also have a set way of doing things and very rigid criteria to access eligibility. This often doesn’t align with the reality of running a small business, with credit score requirements and the need for documentation such as multi-year business plans not achievable for many entrepreneurs and SMEs.
Alternative finance providers can be more flexible, more dynamic and can move much faster. That’s crucial when you need a quick injection of cash, whatever the reason for your urgency. As an alternative finance provider, Punk Business Loans can have cash in your bank in just a couple of working days and we don’t require a perfect credit score or extensive business plan. We know that’s the kind of support you need as an SME, so we make it happen.
Consider a new approach to cashflow management
Manging cash flow is an exercise fraught with problems that very often, may not be of your own making. Late payments is a prime example. When your customers pay you late, you’re left with an imbalance between incomings and outgoings, which can send your cash flow seriously off kilter.
Assessing how you manage your cash flow could unearth ways to ease the pressure. If you create a budget for example and then review all of your expenses against that budget, you may find that there are certain costs you could eliminate or reduce to lighten the burden. Through this process you may also identify expenses that could be deferred until you’ve steadied the ship.
Identify areas for improved efficiency
Wasted (or unnecessary expenditure) can be a huge financial drain and exacerbate the impact of any cash flow issues or lack of capital. Finding more efficient processes and embracing tools such as AI and automation can free up resources, increase productivity and help to bolster profit margins.
Thanks to advances in AI and machine learning, there’s a huge range of tools and technology that could help you work smarter, create more efficient workflows and reduce costs. This could include automating repetitive tasks such as data entry, payment processing, appointment scheduling, reporting, invoicing or email follow ups.
Software like social media scheduling can help in the creation and scheduling of social posts, while chat bots could provide faster, automated customer service responses to standard customer questions.
It’s thought that small businesses could reduce their operating costs by around 30% by embracing automation, while Gartner says automation can save ‘25,000 hours’ of avoidable work per year. That could translate into hundreds of thousands of pounds worth of savings annually.
Explore new sales channels
Whether it’s a new product, service, market or marketing path, adding new sales channels to your business model could generate more revenue. This would offset the impact of capital and cash flow struggles by bringing in more business from new sources.
There are multiple ways this could be actioned. You might want to explore selling on marketplaces such as Amazon or eBay to expand your reach and provide another avenue for revenue generation, for example. Another option would be to repurpose a product or service to target a new market segment or region. Having your website translated into another language could help you tap into a new country or, you could explore a distribution agreement, affiliate scheme or franchise to increase your footprint and diversify your offering.
While creating additional revenue streams won’t give you better access to capital right away, it can help to make your business more sustainable and less susceptible to sudden changes or downturns in one area.
Speak to us
Implementing these strategies and tactics likely won’t have an immediate impact on your cash flow situation but they can help to set you up for longer term success, which is key to survival.
In the short term, you can speak to our team to explore our range of alternative finance solutions for SMEs. Whether you need a fast HMRC loan to keep the wolf from the door, or a working capital loan for access to cash right now, we’re here to help. We’re very different to your usual high street lender so don’t worry if your bank has already turned you down. That doesn’t mean we can’t help! Go on, give us a call.
