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3 common reasons businesses face cash flow problems (and how asset finance can help)

Even with strong sales revenue, long accounts receivable terms means you are being treated like a bank which offers interest free loans. Consequently, most small to medium businesses understand that well managed cash flow makes the difference between just surviving and really thriving. So, with short-term cash flow being the number one reason cited for accessing financing, and access to finance the most common barrier to innovation according to ABS data, a successful business needs to manage cash flow tightly and leverage it for growth. To help ensure your business falls into the “thriving” category, here are the most common reasons you might be experiencing cash flow difficulties and how asset financing can help. 

1. Needing to scale your operations quickly without burning cash

On the surface it doesn’t sound like a problem; you’ve got a great product, customers love it and the orders are pouring in faster than you can fill them. One of the biggest challenges small to medium businesses face when growing is having the cash available to fund your WIP. If you can’t build capacity and scale to improve your fulfilment time, you’re heading for a big cliff. 

Solution: Rather than deploying cash to purchase your new equipment, asset finance will reduce your capital outlay and ensure you’re able to keep growing while still maintaining your working capital.   

2. Ensuring your business stays innovative
If you work in an industry where capital equipment is essential, you’ll know that in today’s rapidly changing world of technology keeping pace can be a pretty expensive proposition. Often you can get away with using a five-year-old piece of machinery, but sometimes not having that new feature is holding you back from business innovation and therefore growth.

Solution: Asset financing allows you to take advantage of new technology and innovate your product or service without the capital outlay. You may even be able to sell your old equipment for some additional cash. Auction houses like Grays Online have dedicated auctions for manufacturing, mining, hospitality/catering and many other business equipment types. 

3. You can’t get approved for debt financing or the interest rate and repayments are holding you back
Securing debt financing can be hard for an SME owner, particularly when you’re first starting out. Creditors are likely to view you as a risky proposition based on your self-employed status. For more established businesses, banks implement blanket policies to avoid certain industries and/or geographies.

Solution: With asset financing, your company’s balance sheet acts as security and can, in some cases, mean you’re able to access a lower interest rate and therefore save money on repayments. Also, asset finance providers tend not to have blanket policies, assessing each business on its merits. That said, it is worth speaking to a finance provider that understands your industry. 

These financing options don’t replace focusing on cash flow fundamentals such as prompt and accurate invoicing, reducing bad debtors and controlling costs but they could just offer complementary ideas on how you can ensure “thriving” describes your business.

87.4 percent of businesses believe equipment finance has helped them grow their business*. Are you one?

Learn how to achieve 63.6% higher business growth!


* "Equipment Finance Thought Leadership Report 2017", East & Partners (commissioned by Eclipx Commercial)

Anthony Roberts
Anthony Roberts
As Managing Director of Eclipx Commercial, Anthony is a true asset and equipment finance expert, having specialised in this area for over 20 years. Anthony’s role encompasses sales leadership, business development and strategic growth for Eclipx Commercial. He is passionate about delivering smarter, more innovative finance solutions to the market and empowering both staff and clients to achieve greater success.

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