Cash flow has always been one of the main culprits limiting the growth of small to medium enterprises (SMEs) or worse, causing them to fail entirely. Sufficient cash flow and working capital are required by every business, large, medium or small, to fund their operations – whether that’s paying staff wages, buying supplies, or repay their loans and borrowings.

Australian SMEs were struggling with cash flow prior to the onset of COVID-19, with 52% of small business owners having difficulty paying themselves. Fortunately, the Government acted fast and implemented schemes to support the flow of credit across the economy. Nonetheless, as stimulus measures continue to phase out over the next few months, many SMEs may find themselves once again in a predicament.

There are many other ways businesses can access cash flow. Traditionally external capital is sourced via banks using secured assets to obtain funding. However, in the current environment, there are a wide range of options from non-bank lenders that may be more accessible than many SME owners realise. If you’ve already tapped out your traditional assets and tried accessing unsecured business loans, there are a few other ‘hidden’ assets you may be able to leverage. Let’s take a look.

Your plant or commercial property

Secured property lending is one of the best ways to access additional funds. If your SME currently owns a manufacturing plant, warehouse, storefront or other valuable commercial property, you can use it to secure an additional loan. You can use a property to access funds alongside other methods, such as a traditional bank loan, credit card or a business line of credit, offering another sustainable stream of cash flow for your growing SME.

Property is a great asset to leverage, given that lenders view it as a stable and safe source of security. Therefore, they will offer you far lower interest rates than other unsecured lending options. However, always keep in mind that there are risks. If you fail to make your payments the lender will have a claim on your property. Manage the risks in your business and ensure your critical assets are protected.

Your unpaid invoices

If your SME sells goods or services to another business on credit, you will need to issue an invoice and wait for payment. Often payments take 30 days or more, sometimes up to three full months. This is a long time to wait to receive payment, sometimes making it difficult to pay for necessary supplies and labour required to fulfil the order. Instead of being cash-strapped by unpaid invoices, debtor finance (AKA invoice finance) allows your business to use them as security against a flexible line of credit.

Debtor finance providers will pay you up to 90% of your verified outstanding invoice value upfront. When your customer pays and the funds are received by your debtor finance provider, they’ll remit the remaining 10% minus a small fee to compensate for early funding. Your business can use this cash instantly to pay your bills, secure new suppliers or invest in growth opportunities.

“Debtor finance is an underrated and underutilised financing option in Australia, although it is growing increasingly popular.”

An invoice finance facility acts as a revolving credit line backed by the invoices you issue to your customers. You can choose to draw down funds as often or as little as you like, only paying for what you use. Instead of waiting up to 90 days for a customer to pay you your invoice, your business can access the cash almost immediately.

Debtor finance is an underrated and underutilised financing option in Australia, although it is growing increasingly popular every year. It’s an excellent solution if your SME is suffering from late-paying customers or simply needs an additional source of funding.

Your business equipment

Equipment finance is a financing solution that allows your business to purchase and make use of a commercial asset immediately while paying it off over time. It’s an excellent option for companies looking to invest in new productive assets without outlying the total cost upfront.

While equipment finance it’s often used to purchase new equipment, it’s also a useful tool to raise funds from equipment and assets you already own. Certain types of equipment are better security than others. For example, ‘hard’ physical assets such as commercial vehicles, manufacturing machinery or farming tools, such as tractors, are excellent security to use against an additional loan. Harder to sell equipment, such as software and furniture, are not as useful when accessing more funds – so keep in mind which assets are best for you to leverage.

Another option is a sale and leaseback arrangement. Under this scenario, you sell your equipment or machinery to a financier for an upfront payment, paying them an ongoing monthly lease payment. This provides your SME with working capital immediately, while spreading the cash outflow over the remainder of the agreement.

Whatever your situation, it’s a great idea to speak to a knowledgeable business finance broker who can help you identify opportunities to access additional capital from your existing assets. Capital Plus Finance is an experienced business finance broker that has your best interests at heart. The team at Capital Plus Finance will do everything we can to help you secure a suitable finance solution for your small business. Please give us a call anytime to find out more or to have an obligation-free chat about your business’s funding situation.