How can I improve my business’s cash flow with financing?

Cash flow is the lifeblood of every business. Healthy sales and strong profits on paper aren’t enough if the cash isn’t coming in quickly enough to cover your day-to-day expenses. Salaries, rent, supplier payments, and tax bills are an ongoing strain on cash flow. That’s why cash flow management is one of the most important aspects of running a successful business.

When cash flow is tight, financing can be crucial in keeping your business afloat. In this article, we examine the available options and their potential benefits.

Why cash flow matters

Good cash flow means having the money available when you need it. Unpaid invoices might look good on paper, but they won’t help you pay your bills. Poor cash flow is one of the most common reasons profitable businesses fail.

Reasons for poor cash flow can include:

• Seasonal peaks and troughs – many businesses, such as those in retail, tourism, or construction, have significant fluctuations in income throughout the year.
• Late payments – if customers don’t settle invoices promptly, it can quickly drain the bank balance even if sales are strong.
• Unexpected costs – equipment breakdowns, staff sickness, or seizing sudden opportunities can all impact cash reserves.
• Growth opportunities – growing too quickly without sufficient cash flow can be just as risky as not expanding at all.

Financing can act as a buffer, helping you bridge the gap between outgoing and incoming funds.

How financing can support cash flow

Several types of finance can help smooth cash flow. The right option depends on your business, sector, and specific challenges. Here are some of the most common solutions.

Invoice finance

Invoice finance enables you to access funds tied up in unpaid invoices, sometimes within just 24 hours. Either the lender assumes responsibility for collecting the debt and pays you a percentage of the invoice value (invoice factoring), or you receive payment for the invoice and then repay the lender (invoice discounting).

Invoice finance can be particularly beneficial for businesses with a strong sales ledger but lengthy payment cycles. It ensures a stable cash flow, allowing you to meet operating costs promptly.

Overdrafts and revolving credit facilities

An overdraft or revolving credit facility gives you flexible access to funds whenever you need them. Unlike a term loan, where you borrow a set amount and repay it over a fixed period, revolving credit allows you to draw down money, repay it, and borrow again as required.

This flexibility makes it ideal for managing short-term fluctuations in cash flow, such as covering supplier payments while waiting for customers to settle their accounts.

Short-term business loans

A short-term loan provides a lump sum upfront that you repay over a set period. This can be helpful if you need to cover a one-off cash flow challenge, such as a large tax bill, a seasonal stock purchase, or an unexpected repair.

Repayments are fixed and predictable, making budgeting easier. However, loans are less flexible than revolving facilities, so they are best suited to specific, one-off requirements.

Asset finance

If your business depends on vehicles, machinery, or other equipment, asset finance can be a smart way to maintain cash flow. Instead of paying large sums upfront for new assets, you distribute the cost over time through hire purchase or leasing.

Asset refinancing is another option, whereby you use existing assets to release capital back into the business. Both approaches help free up cash for other priorities.

Trade finance

For companies involved in importing or exporting, trade finance can relieve the pressure of long supply chains and payment delays. It can provide the working capital necessary to pay overseas suppliers upfront while allowing you time to collect payment from customers.

What lenders look for

If you’re exploring financing options to improve your cash flow, it’s helpful to understand what lenders look for. Generally, they’ll review:

• Your sales ledger – regular, predictable invoicing makes invoice finance more viable.
• Historic performance – evidence of turnover, profitability, and trading history.
• Cash flow forecasts – a clear plan showing how you’ll use the finance and how it will be repaid.
• Sector risks – some industries carry more risk than others, so lenders will consider this and may apply stricter criteria.
• Security – depending on the facility, lenders may require business assets, personal guarantees, or other forms of security.

Preparation is key. Having up-to-date management accounts, cash flow projections, and a clear explanation of why you need the finance will strengthen your application.

Balancing financing with cash flow management

Financing is a valuable tool, but it isn’t a substitute for good cash flow management. Before turning to external funding, it’s worth considering other steps to improve your position:

• Encourage faster payments – offer incentives for early settlement or use digital invoicing to speed up processing.
• Tighten credit control – don’t let overdue invoices slide. A clear collection process can make a big difference.
• Review costs – regularly check for unnecessary expenditure that may be draining cash.
• Plan ahead – forecasting can highlight potential gaps before they become critical.

Combining these practices with financing can ensure your business always has the necessary liquidity.

The benefits of using finance for cash flow

Used wisely, financing can deliver several benefits beyond paying the everyday bills:

• Peace of mind – knowing you have access to funds reduces stress and allows you to focus on growth.
• Operational stability – staff, suppliers, and creditors are paid on time, maintaining strong relationships.
• Flexibility to seize opportunities – with cash available, you can act quickly on new contracts or investment opportunities.
• Smoother growth trajectory – financing helps you manage expansion without putting day-to-day operations at risk.

How ASC can help

Every business is unique, and so are its cash flow challenges. At ASC, we’ve spent more than 50 years helping entrepreneurs and business owners secure the finance they need. We:

• Take the time to understand your specific cash flow issues.
• Identify the most suitable financing options for your situation.
• Present your case to lenders in the right way.
• Save you time and stress by managing the process on your behalf.

We’re independent and not tied to any one lender, so we can focus solely on finding the right solution for you.

Cash flow challenges affect businesses of all sizes, but the right financing can make a big difference. Whether it’s invoice finance, a short-term loan, asset finance, or a revolving facility, there are solutions to ensure cash is available in the bank when needed.

If you’d like to explore how financing could help your business improve its cash flow, get in touch with us today. We’ll work with you to find the right option for your needs.