It’s not easy to predict the scenario that could create a cash flow crisis, but it is easy to plan for one. A standby finance facility makes it possible to maintain control even when a business loses its ability to access cash.
Quick takeaways if you’re in a hurry
– There are a number of scenarios – often outside a company’s control – that can cause a company to have a cash flow crisis
– It’s important to be prepared. A Fifo Capital standby facility gives businesses access to cash quickly, when they need it most.
– If businesses don’t access the standby facility there is no charge and no obligation to draw down funds.
Read on: Proactive finance for better business
(estimated reading time: 7 minutes)
Being in charge of a company is a non-stop commitment. Every day is filled with decisions; endless tasks; interactions with customers and colleagues. Furthermore it’s important to focus on the future, seeking the next venture, considering the opportunities for innovation, improving the functionality of the business.
If you think about the sheer volume work that a business owner faces, it isn’t surprising that much of their time is spent reacting to their to-do list. They rarely have time to work on the ‘what if’ scenarios of business. But forward planning for a financial crisis is both an important and valuable investment.
Standby finance facilities – protection against the unexpected
Businesses are short of time and struggle to plan for financial difficulty. But the old business adage: “Turnover is vanity, profit is sanity, but cash is reality” summarises well the importance of cash flow to a company. Failing to plan effectively could lead to business failure in a crisis.
Businesses purchase insurance to protect the infrastructure that they depend on from the unexpected. So if a crisis occurs it doesn’t need to be catastrophic – the funding will be available from the insurance company to keep the doors open.
It is equally important that companies build a protection plan for the potentially devastating impact of a cash flow crisis. If a customer’s business goes under and they cannot make a payment, or a bank reassesses its security position and withholds funding, or a critical piece of equipment fails, it’s entirely feasible that a business could suddenly find its cash reserves depleted and be unable to continue operations.
So what’s the solution? A simple application process can secure a standby finance facility. A standby finance facility can protect a business from the impact of a future cash flow challenge.
Why set up a standby finance facility?
– Setting up a standby facility gives a business the buffer it needs to deal with the ‘what if’ challenges of cash flow management.
– The situations that result in businesses losing their cash reserves can commonly be outside their control.
– Unplanned for cash flow difficulties leave businesses with little time to react and access the funding needed to maintain daily operations.
– There is no obligation to use a standby finance facility if the business finds they don’t need it
There is no cost to set up a standby finance facility but there is huge value in being prepared to react to a cash flow crisis.
Trying to choose a financial provider and select the right product to match a company’s needs whilst battling a financial crisis can be very stressful. A standby facility allows a business to find the structure they prefer for their finance in advance, whilst ensuring they will get fast access to cash when they need it.
Support from Fifo Capital
To create a Fifo Capital standby facility, businesses work in partnership with a Fifo Capital Business Partner to determine a plan to meet their potential future cash flow needs. Fifo Capital Business Partners have years of experience and can share their understanding of the challenges faced by a range of businesses across different industries.
Reviewing a business allows a Fifo Capital Business Partner to suggest areas of risk. Some risks will be able to addressed now, and others may need to be planned for. Fifo Capital can help a business to find the right solution today for finance issues that might happen tomorrow.
When would a business choose invoice finance for their stand-by facility?
Invoice finance could be the right choice for a company if they are looking for short term finance and they invoice their customers.
Invoice finance gives a business the ability to sell individual invoices or groups of invoices to a finance company. The business receives up to 90 percent of the invoice value straight away. When the invoice is due to be paid, the customer pays the finance company direct and, after deducting their fee, the finance company pays the remainder back to the business.
Fifo Capital can often manage the security requirements of invoice finance with only the customer as security. This means that invoice finance can be an ideal option for companies who don’t want to impact existing finance agreements.
When would a business choose a short term business loan for their standby facility?
If a business wants to set up finance for a longer period, they may prefer a short term business loan.
Short term business loans with Fifo Capital allow businesses to manage the duration and level of their borrowing. Businesses enjoy control over their repayments with flexible options that make it possible to pay the loan back quickly where possible. Fifo Capital Business Partners have the expertise needed to manage security requirements to the ability of the business while avoiding conflict with other pre-existing finance agreements.
A Fifo Capital Business Partner can help a business to assess the situations that could create cash flow issues. Businesses can not always tell when a cash flow crisis is going to occur, but they do have the ability to plan for them. Creating a standby facility allows a business to access the cash it needs quickly when it’s needed.
Invoice Finance, Cashflow Solutions and Business Loans
Fifo Capital are experts in cashflow solutions for small to medium business. Find out more about invoice finance and our fast business loans here: