How lending post-Covid can help your business recover

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(Image: Getty Images)
(Image: Getty Images)

What do Microsoft, Airbnb, Netflix, MTV, General Electric and Disney have in common? They were all started during recessions.

It’s a curious irony of life that many successful business begin during economically challenging times. Economic downturns are tough – large companies downsize and small ones close, people lose their jobs and cash reserves are depleted to keep things afloat. But during these times society is also hungry for innovation, competitors may be fewer or vulnerable, people are looking for jobs and clients are looking to save money. These factors all present opportunity for entrepreneurs to get start-ups going and small business owners to expand their operations or product offering.

Unfortunately, tough times also make banks extremely reluctant to loan money to small businesses. In 2018, the SME Finance Forum reported a that 41% of formal micro, small and medium-sized businesses in developing had unmet finance needs, making for a funding gap of more than R73-trillion. That was before Covid-19 wreaked havoc on the local and global economy. The Wall Street Journal subsequently found that while loans to businesses had multiplied during the pandemic, bank funding for small businesses dwindled.

Alternative financing solutions

In this environment, small businesses are increasingly turning to alternative lenders – non-bank organisations that provide funding for a variety of businesses purposes and applications. The concept has existed for as long as businesses have needed money, but the years following the 2008 financial crisis saw a proliferation of alternative lenders with operating models designed to take advantage of technology and consider alternative data for underwriting purposes.

Now this sector is well positioned to aid the recovery of small businesses trying to survive or even thrive as the worst of the pandemic recedes. One local lender offering working to make fast and innovative funding available to businesses is Cash Flow Capital, which offers a variety of funding options to help businesses get back on their feet.

Cash flow

Achieving long-term business goals requires a whole host of short-term solutions to maintain a viable cash flow. This is especially true in the post-Covid environment, where reserves have been depleted weathering successive lockdowns, reduced consumer spending and supply chain disruptions.

This is where short-term business loan (or merchant cash advance) comes in handy. With this sort of funding, the lender evaluates your bank account receipts and loans an amount of money in line with your cash flow position and what you’re thus likely able to pay back. While this might at first seem restrictive, it creates a sense of security for both lender and borrower. Moreover, the loan is automatically paid off through fixed debit orders, allowing you to budget effectively.

To help businesses keep things moving, Cash Flow Capital offers 100% unsecured and unrestricted merchant cash advances with a 72-hour approval turnaround and no fixed interest rates.

The assets you need

The uncertainty of Covid-19 may have prompted small businesses to put off purchasing important equipment, vehicles or technology. However, delaying these sorts of necessary investments can reduce business growth and hurt your competitiveness.

Asset finance enables businesses to buy high-value items while spreading their cost over the long term – even the lifespan of the items themselves. And as these items typically support business growth, paying them back should become easier as time goes on.

Cash Flow Capital offers asset finance through its sister company, Preference Capital Asset Finance, that enables businesses to access crucial assets without compromising cash flow, with the option of selling or leasing back existing assets to obtain additional funding should it be required.

Easing trade

You can’t do business if you don’t trade, and you can’t trade if you don’t have stock. Disruptions to supply chains cash flow have hurt the inventories of many businesses, in turn affecting their ability to trade internationally. Trade finance makes it easier for importers and exporters to do business by reconciling their respective needs, thus reducing risk.

With trade finance from Cash Flow Capital, businesses can purchase additional stock, increase import and export volumes, and fund the operational cycle without cutting into daily working capital resources. This is crucial in tough economic times, when operations and growth often have to be balanced so carefully. It can also support forwarding and clearing costs, foreign exchange costs, transportation and insurance, and customs and duty payments.

About Cash Flow Capital

Cash Flow Capital offers short-term business funding to help SMEs reach their goals. The company is as dynamic as those it serves, recognising that businesses need access to innovative funding quickly in today’s ever-changing economic environment. Coupled with its unique distribution channel and proprietary funding model, this has helped Cash Flow Capital grow to be the leading unsecured business funder in South Africa.

This post was sponsored by Cash Flow Capital and produced by Adspace Studio.

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