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Options to secure working capital for your business

As any business owner will tell you, having access to cash flow and working capital is essential to maintain and grow your business.

Without adequate working capital, you might struggle to take on new projects, hire additional staff, or pay suppliers. Thankfully, however, several options are available to increase your working capital if your cash flow is squeezed or you need finance to take advantage of a business opportunity.

Some of your options include the following.

Working capital finance options

Invoice finance

Invoice finance is a way to access capital quickly – sometimes within 24 hours. With invoice finance, the lender uses an unpaid invoice as security for a loan. Either the lender takes over the 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).

Peer-to-peer finance

Peer-to-peer commercial funding is a form of financing that connects businesses requiring funds with investors looking for attractive returns on their investments.

Working capital loans

Working capital loans are regular business loans tailored to address working capital needs specifically. They can be taken out on a short or medium-term basis. A secured working capital loan will require collateral; the amount you can borrow will depend on the assets you can provide as security.

Asset finance

With asset finance, you use the assets on your balance sheet as security to borrow money. The amount you can borrow depends on the value of the items used to secure funding against.

Merchant cash advances

Merchant cash advances are an option if your business accepts customer payment using card terminals. With a merchant cash advance, you receive an upfront payment in exchange for a portion of your future daily credit/debit card receipts. The amount you receive is usually a percentage of your average monthly card revenue.

Business overdraft

A business overdraft is a line of credit on your business bank account. Business overdrafts are flexible and provide instant access to cash, but they can be a more expensive finance option.

This list isn’t exhaustive but includes some of the more common types. When considering your options, you should look at the pros and cons of each and evaluate your business’s specific needs. Consulting with a financial professional can help you make an informed decision.

Working capital - what are your options?

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