One of the most important relationships that any business has is with their financial institution. For many SMEs, cash flow is a constant problem. Because of this it’s critical to find the best ways to effectively understand and leverage the credit options that are available. Doing this well can make all the difference in ensuring that your operations run smoothly and that you can take advantage of the opportunities you need to make your business grow and thrive.

cash flow solutions - How to get the most out of your financial institution

Making good financing decisions in the long term isn’t as simple as getting a quick consultation from the lender down the street and taking whatever they offer. It’s important to learn about how different financing options work, and to develop a long-term relationship with a financial professional who understands your industry and your business’ unique needs.

Develop financial literacy

Business owners often aren’t aware of all the options that are available to them and their business. This can make it difficult to decide exactly what kind of solution is right for their particular situation. As a result, the options they go with might not be as cost effective, or easy to manage, as it could be. Even if the initial cash flow problem is addressed, the extra time and money that might be lost can make your business less competitive over time.

If you haven’t examined your options carefully in advance, you’ll be dependent on your banking institution to help you make a good decision on the spot, and you’ll be forced to negotiate your loan terms from a position of weakness. Your cash flow issues will likely be addressed, but you won’t be able to mindfully control how.

There are a lot of different types of credit solutions that will be more attractive in particular situations than a regular business loan. For example, your business might be trying to deal with…

Delayed income

If you’re tackling a large project and need an advance on an outstanding invoice before if comes due, you can use invoice factoring to sell your invoice for nearly all of its final value. This can help you get access to funds that you’re already owed, but that would otherwise arrive uncomfortably late.

Seasonal slowdowns

If your business experiences cyclical slowdowns, you can address the issue by opening a business line of credit. Lines of credit are very flexible and you only have to pay interest on the funds you actually draw, so it’s relatively simple and inexpensive to let it lie dormant when business is good.

Import costs

Importing goods can be very expensive, and the amount of time it takes to ship and resell goods can be prohibitive for a lot of small businesses. To tackle that, import financing is designed to bridge that gap between payment for imported goods, and revenue generated through the sale of those goods.

The Fifo Capital blog and our business finance page offer more details on these and a variety of other financing options. The more you know about your financing options, the more empowered you’ll be to make the decisions that are best for your business.

Build long term relationships

Another thing that can cause problems is overly superficial relationships with your financial institution’s representatives. Working with the same lender and the same representative for a long period of time has several key benefits.

Personalised service

A lot of larger banks are too large to offer personalised one-to-one service to small or medium sized businesses. That means that you might be forced to work with a different representative every time you call, meaning that the person you talk to might not be as familiar with you, your business, or your business’ history as you might like. That’s why it’s important to work with a more personal kind of provider like Fifo Capital, where relationship building and continuity are emphasised.

Developing mutual interest

When you take out a loan, the lender’s interest in the transaction is primarily just the money they earn in interest as a result of that loan. That’s not a problem per se, but it means that you have to negotiate your way through an adversarial relationship. The more expensive the loan is, the better off your bank will be, and the less advantageous the deal will be for your business.

If you work with the same institution in the long term, that relationship is naturally different. If your lender can rely on your future business, then prioritising your business’ long term success will inevitably generate more profit for them than selling you on a less-than-ideal loan.

Communicate your needs

As a well informed customer speaking to a dedicated financial representative that’s on your side, you’ll have the tools you need to get the most out of your lending institution. At this point it’s a matter of practicing good communication.

Explain your situation

To get great guidance, you’ll first need to explain exactly what your financial needs are, and how your business operates. It’s not safe to assume that the person you’re talking to has a firm grasp of all the intricacies of your specific industry. The more your provider knows about you, the better they’ll be able to meet your needs. To that end, it’s good to offer more information than is required from you to qualify for a loan or other financing option.

Ask the right questions

As an informed customer, you may already have some well developed ideas about what’ll work best for you. This is great, and it lays the groundwork for a much more in-depth discussion about your options than you’d likely be able to have otherwise. Go out of your way to get specific feedback about the strengths and weaknesses on the different options that are available to you. In doing this, you’ll involve your provider in an expert advisory role, while maintaining full control over your financial decisions.

Taking these steps allows you to work together with your lender in a symbiotic relationship. At Fifo Capital we strongly encourage long-term one-to-one relationships that are built on mutual trust, expertise, and experience. Give us a call today to get in touch!

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