It’s a phrase most business owners have heard many times but I’m not sure if many have really sat back and thought about what it means, more importantly what it means for their business.

The term was stolen from the investment banking world; used by traders who couldn’t sell high priced bonds because investors were “hanging on to cash” for a better deal. The investor who had the most readily available cash to take advantage of a better deal was “king”. 

Similarly in our world (the working capital world) it means a business with cash, or the availability of cash, is more agile than its competition. It can take advantage of better pricing of stock and raw materials, pay quicker therefore negotiating a better rate, enhance their spending on marketing or pay more competitively to get the right people. All of which enhances their business and ultimately generates more revenue and hopefully more profit.

But how does a business improve its cash position? The simple answer to many businesses is they borrow it!!!

There is a great deal of available cash in the lending market place, the media explains this as a “highly liquid lending market”, however business owners sometimes struggle to find the right funding for their business. Each business is unique but unfortunately the lenders would like you all to be the same. Lenders products differ dramatically but are frequently called the same name, their underwriting parameters or “risk appetites” are vastly different from one to the other. Business owners will often go to their clearing bank first but unfortunately their appetite to lend to the SME market is very hit and miss, leaving business owners not knowing where to go. The internet is full of commercial loan, invoice finance, trade finance, asset finance cashflow finance providers but understanding what they all do is a minefield and I’m not surprised when business owners are asked about access to cash their answer is generally….access is poor.

In fact the availability of cash is as high as it’s ever been; but getting it and getting the right cash is a pain in the ….

If we look at the current economic environment, then I would suggest that cash is more important than ever!!! High raw materials & component costs, high transport and trade costs, gas / electric prices increasing. Labour costs higher than ever due to skill shortages and ultimately Joe public is spending less; these all could lead to a tough trading period. However the businesses who build into their model and margin these economic issues and are able to weather them due to their cash position will ultimately come out of this period in a much stronger position.

If anyone would like to talk to me about cashflow solutions please get in touch.