Cash is the life blood of business. Regardless of whether you are profitable or loss making, if you have cash you can continue, if don't you'll go under. The way you finance your business and selecting appropriate types of finance play a crucial role in this.
Overdrafts are designed for short-term fluctuations in cash-flow, to deal with day-to-day transactions; they aren't meant to finance large, medium-long term assets and projects.
If you are acquiring an asset, such as a vehicle or piece of machinery, that will be used in the business for several years then some form of assets finance, such as Hire Purchase, Lease Purchase or a loan secured against the asset, is most appropriate; finance with a term similar to the useful life of the asset.
For medium to long term projects, including starting a new or expanding an existing business a medium-long term loan is likely to be most appropriate but in a rapidly expanding business Invoice Finance may be a more suitable option as the size of the facility increases as the business grows so you are not continually having to renegotiate additional loans or ever increasing overdraft facilities.
Whatever form of finance you are seeking the key to obtaining it is to give the lender belief and confidence in you and your business - confidence that it will succeed and be able to meet its obligations as they fall due.
Cash-flow projections are a valuable tool in achieving this but the most important, and over often overlooked, element is the words that go behind these projections, the written business plan that informs the lender what you are doing, how you will do it, how people will know who you are, what you do and, critically, why they will choose to trust and buy from you rather than someone else.
Demonstrate to lenders that there is substance and reasoning behind the numbers in the cash-flow and that the turnover figure is a realistic forecast and not just the missing number needed to make the cash-flow work.
The way you finance your business can have huge implications. Trying to do everything out of cash-flow or short-term solutions can put an intolerable strain on the business, ultimately even leading to failure. So take time and advice to consider the most appropriate way to finance (or re-finance) your business to enable it to thrive.