It’s tough times in a lot of industries at the moment – there are big cost increases, ongoing supply chain disruptions, shortages of skilled staff, rising interest rates, increased disruptions from COVID… and I could keep going.
But great fortunes can be made in tough times. You need these things:
• Good business strategy
• Good financial strategy
• Adequate working capital
• Discipline to “work the plan”
• Flexibility to change the plan when the world changes
Two key finance tools I use a lot are trade finance and debtor finance.These tools free up cash in two ways:
Trade finance frees up a lot of the cash you’ve paid to your vendors.
Debtor finance gives you access to a lot of the money your customers owe you (now, not when they actually pay you)
These products are particularly attractive today, because while interest rates are no longer zero, they’re still relatively low (and way better than credit card rates). Having access to the Working Capital they provide opens up big opportunities.
With one recent customer, the right working capital finance gave them access to $200,000 – as a lump sum, available immediately.(And without mortgaging family assets.)
That sort of money doesn’t just solve their short term cash flow problems – it ALSO creates opportunity. That sort of money means they can actively build for the future, instead of “hanging on and hoping” in today’s disrupted business environment.
Liquidity creates advantage
If you have liquidity in tough times, then when everybody else is pulling in their horns and wanting to close up shop you can out-perform – or even buy out – your competitors.
The fancy name for this is counter-cyclical thinking or more simply – “don’t be a sheep”.
So while everybody is tightening their belts and getting conservative, you can use your Working Capital to your advantage.
For example, you could:
Buy larger quantities or pay early to get cost discounts from suppliers.
Pay your subcontractors quicker than the rest of the market – so you’re prioritised as their favourite customer.
Invest in admin systems, tools or training that will free your business to grow.
All the great fortunes are made in tough times. So IF you’ve got the courage, the conviction and the vision then having extra Working Capital means that you’re able to back yourself.
With the right funding, you can look ahead – not just “where am I going to be in one year” but “Where do I want to be in 3-5 years? And how can I set the foundations for that today?”
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Discussion on working capital and funding options: