Most companies experience times when they are busy and others when they are quiet. Whilst a spike in the business cash flow may seem good for a while, the fall on the other side can have detrimental affects for the company. Many companies find invoice financing in the form of factoring or discounting as a good way of dealing with these cash flow issues, partially flattening the affects. However, when there is an issue with the invoice financers, it can have a significant detrimental affect.
On stop by your invoice financiers?
We were recently approached by a company that was on stop with their invoice financers. The paperwork had not been kept up to date by the company, and as a result no funds were released whilst this problem was resolved. Although significant monies were being held, none were available, until the company could provide remittance advices and purchase orders for the payment held. Although this was possible, it would take some time to happen, during which time the company was starved of cash.
The cash flow issues meant the directors needed to act quickly but were aware that they could not resolve the cash flow problems with their current invoice financers or set up a new arrangement in time to avoid disruption to the business. The wages were already overdue and the employees had threatened to go on stop themselves if the situation was not resolved. Due to the time restraints and the banks tight lending criteria a traditional bank loan was not possible, as it would have taken as long to get the loan, as it would have done to resolve the factoring issue.
As well as the employee issues, the directors were worried about the issues that would arise if they were unable to pay suppliers on time, and were concerned about the general impact on trading.
How Cashsolv can help
This is where Cashsolv was able to assist. An emergency business loan could be used as bridging finance to assist with cash flow until the invoice factoring positon was resolved, it was expected that this would take around one month. We reviewed the company’s cash flow forecast and management accounts and it was clear the company was viable despite the current issues it was facing. We agreed an emergency loan with the directors.
The loan provided meant the company was able to continue trading and paying its suppliers and employees. This meant there was no disruption to the business, and no damaged caused to the company’s reputation or the relationships it had worked hard to build with its suppliers.
Since providing the loan, the directors have successfully provided all the necessary information, and been able to get the funds held, released. The loan was then repaid in full. The directors were able to use the business loan to ensure the issue with the factoring had minimal effect on the company. Proper management tools and accounting procedures have also been put in place to ensure that the issue does not happen again.
Our straight forward approach to lending allows us to work with flexibility and meant the directors could spend their time overcoming the immediate issues and planning for the future of the company.