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Why is cash flow even an issue?

We’ve all heard the quote “turnover is vanity, profit is sanity, and cash is always king”…

We understand that turnover is the level of sales our business makes, we also understand that some things we sell make more money than others and that it is never a good idea to sell something at less than it costs to provide.

But do we really understand what cash flow is and how to use it to benefit the growth of your business?

In essence, good cash flow is securing the profit you have made on the Companies turnover as soon as possible and paying for the inputs, that were required to make that sale, on time. Inputs could be the simple cost of an item, distribution costs plus administrative overhead. Or they could be more complex, say in a situation where a process is used that has many inputs at every stage in the process.

Paying for the inputs

If you need to pay for the inputs before you receive the actual cash you will need to find a solution to cover the cash costs. Cash is therefore separate from the accounting profit.

If you are producing a product over a number of months (like a house for example) there will be many costs that need to be paid for to end up with a finished house that can be sold. From an accounting perspective these costs will be deducted from the sales price to arrive at a profit when it is sold. But until it is sold cash is going out of the business and is being recorded as ‘work in process’ or ‘stock’ as an asset on the balance sheet. This is just an accounting way of carrying forward costs to allocate them to the sales value in the future accounting period, but this has no resemblance to the cash reality of what is going on.

It probably goes without saying that the best cash flow you can get is to receive the funds up front.

There are many ways to ensure this happens and in businesses that serve the consumer it is the norm.

However, further down the supply chain there are many more businesses that add value to a finished product or service. The norm here is to offer trade credit terms allowing time for a customer to pay for the good or service provided.

The use of credit

The use of credit allows for faster delivery of the good or service as invoicing and payment are not required beforehand. It has sparked many industries – credit control, credit reference agencies, debt collection, trade credit insurance, invoice finance, to name a few.

With the ability of customers to pay late or go out of business before the payment is made to you it is no wonder that this availability of credit is a cause for much consternation. In the UK many businesses are regularly paid late – this is the same for those involved in public and private supply chains.

Late payments

Late payment is more normal than payment on time. This has an inevitable knock-on effect that means Companies paid late cannot pay their supplier commitments and so on down the line. The first step in good cash flow is rarely adhered to.

Even in industries that supply to end consumer businesses (such as supermarkets and cafes) that take payment from their customer on the day the goods are sold, credit is given to them by their suppliers. This credit allows the retailer to stock their shelves with unpaid products in the hope that these get sold before the payment is due to be made to the supplier. If they don’t, this can have a negative impact on cash flow as they will still be required to pay for them.

Trade credit

With trade credit a necessity for the smooth operation of business, it is those businesses that manage their cash flow well that will have excess cash available to take advantage of new opportunities.

In business there are many phases but cash flow can be split into 3:

  1. Scraping by, or just surviving
  2. Extra cash for investing back in
  3. Excess cash to start taking rewards

Personally, I find statements like these quite misleading as they imply that there is a clear point at which one phase starts and the other ends. But imagine, if you will, lots of grey areas and cross over between them and also that you can move up and/or down the scale depending on how good you are at managing your cash.

Level 1 is when you barely have enough cash to cover your costs of operating – there is no spare cash – most often this is attributed to start ups, but I know of many businesses that struggle to move past this phase as they don’t follow the next step before reaching the third – those businesses are forever doomed to either just get by or die!

Level 2 is where you have extra cash in your business over and above operating costs – my goodness you’ve worked hard to get to this point. You are now thinking that having made some headway it is time to take some money out for yourself.

I’ve been here and I know the temptation is hard to resist. But resist it you must. You are not yet the owner of a business – just a better paying job!

If you want to benefit from the freedom that a business that can operate without you can provide, you must use the extra cash generated by the business to invest it back into the business. Improve your capacity, develop systems that encapsulate your vision so that you can employ people to operate and manage them for you – you will make the business more consistent/reliable for your customers which will in turn make it more valuable to you. A potential purchaser can be shown that the business operates without you – you will be amazed what this adds to the multiples you can achieve at sale…

Cash management

Level 3 is the point where, as an owner, you can start to reward yourself for having put in the extra effort at level 2. The business has sufficient cash to operate and take advantage of opportunities and any excess cash can be withdrawn to allow you the freedom to live the life you always wanted.

This is not to say that ‘the business runs itself’ and that you will never again experience cash flow crises – the size of a business is no guarantee of plain sailing and consistent profit – just look at Woolworths, Carrillion, Thomas Cook and Intu… they all ran out of cash even though they were ‘profitable’!!

But, with a focus on generating cash first and NOT accounting profit, I believe these steps can be navigated and the ingrained discipline around cash management that will have developed will be a good basis for continued success.

Playfair Finance wants to help as many businesses as we possibly can. Contact us today so that we can help you set up a plan and work out a solution to keep the cash flowing through your business.

Call us today on 01383 624 425 or submit an enquiry and we will contact you.

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Commercial finance problems?

Money troubles.

I’ve been there.

I’ve had them.

And they’re not nice.


When I had them, I also had problems trying to access people who could help me with those problems.

So, my name is Graeme Shevas and I’m a Commercial Finance Broker, and I’m aware of the issues that some people are facing, having had them myself over the years. And I really can understand, I’ve been where you are.

So, if you are feeling some sort of vulnerability at the moment or you’re a little bit apprehensive about how you are going to trade forward, don’t be embarrassed if you are encountering difficulties. Pride is not going to help you at this stage.

What you need is somebody who is going to help you to win and succeed as you come out of this on the basis of providing you with a facility and a solution that will help you to trade out, and get back to the normal levels of profit and beyond, once we come through this.

Trade Credit Insurance

Something else that you may not have thought of is Trade Credit Insurance.

Normally this is an insurance that you would get if you had an Invoice Finance Facility in place whereby the lender insures, or you insure, the debts effectively, so that the lender takes them on.

You don’t get them back, and have them removed from your credit facility, the lender gets
them back and they are insured.

Now, normally, as I say, it’s part of an Invoice Finance Facility, but it is actually available separately.

So if somebody is in need of securing their selves in terms of bad debts, or the potential of bad debts, going forward, then this policy might be something that is of interest to you.

So, if you have a requirement to mitigate your risk of bad debt, there is an insurance policy,
called a Trade Credit insurance policy, and I have access to one of the major providers of that cover in the UK.

So, don’t bury your head in the sand, would be my advice.

Please get in touch and we will do what we can to help you with a solution that’ll help you to get through.

Let’s work together and bring as many businesses through this situation as we can.

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The transformed business finance landscape

I would like to use this time to try to take stock of what has happened over the last three months in terms of the Coronavirus pandemic and the support available for U.K businesses.

Even though it has only really been a few months, it has completely transformed the way some businesses do business.

And it has certainly transformed the financial landscape for all businesses and will probably continue to do so for the next maybe six, twelve, maybe even eighteen months.

Is this the landscape that you feel your business is in?

I think the prediction, really, from many bodies is that we will not actually get back to being where we were at in the next three years.

So it’s going to be difficult trading conditions and some of these problems that we have been encountering, you just could never have envisaged happening in a month of Sundays.

So, if you are experiencing difficulty with your finances, then please do not panic.

Do not bury your head in the sand.

Get some expert advice.

And if you get some expert advice, you have got a chance of being able to plan your way out of the Coronavirus pandemic and trade back to some level of normality rather than getting to the point where maybe you run out of cash and everything falls about around you.

That would be a tragedy for any business, but particularly as a result of, really, something you had no control over.

Contact us so we can put your business back into a thriving landscape.

So, if there is any way that we can help you at all, please DO get in touch.

That is what we are here for.

We want to save as many businesses as we possibly can, because only by businesses surviving will the economy start to thrive again.

Call us today on 01383 624 425 or submit an enquiry and we will contact you.

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Are you starting to panic about business cashflow or invoice funding?

I have been wondering whether there are people out there who have businesses who are starting to panic a little bit about their financial situation.

Now, this could be a growing feeling of concern that your cash flow is going to stall, or maybe you have noticed that the cash is not moving around your business as it did before the Coronavirus pandemic. You might have the growing realisation that you are going to run out of cash before you actually start to get money coming back in through the door.

Raising Invoices

Or it could be that you are raising invoices, but you are not getting paid as quickly as you would like to get paid.

So, you are wondering how you are going to pay your own bills, or it just could be that you don’t have any cash reserves?

As a result of not having any cash reserves, you have no confidence in terms of being able to meet your commitments going forward.

If this is the case, then we may have a solution for you, and it is a solution that I have used in the past in previous businesses to ensure that the cash keeps flowing, and that cash flow solution can be a life saver.


And if it is a life saver and we can help to save more businesses from going out of business, then that is why I am here.

So, if you do have a requirement to even just talk to somebody about it, because the worst thing you can do really is to bury your head in the sand and think that everything’s going to be fine, and it will go away.

It probably will not go away, and it will need to be addressed.

Review your businesses financial plan

Now, whether it is addressed with reviewing your financial plan and your costs or whether it is by putting a solution in place, something needs to happen.

Contact us today so that we can help you set up a plan and work out a solution to keep the cash flowing through your business.


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Commercial funding for U.K businesses

Today I’m going to talk a little bit about the history of the lockdown.

As an expert U.K business finance broker, we’ve been in lockdown for 110 days now.

110 days ago, we had some issues in terms of how we were going to fund UK business going forward. The government has variously put forward schemes, so from the Coronavirus Business Interruption Loan Scheme, or CBILS as you will have heard it, and then latterly the Bounceback Loan scheme for the 100 percent guarantee loan.

But the number of lenders that have come on stream in the last hundred-odd days is quite
remarkable, really. At the beginning of the lockdown, we had 42 lenders who were operating, previously, the Enterprise Finance Guarantee Scheme, and they were the route
that the government took to get the money that they guaranteed out to market.

Banks became inundated, they ended up with lots of backlogs and they were not taking on new cases from non-customers, so it became a little bit difficult to get some facilities through.

Coronavirus Business Interruption Loan Scheme.

However, we now have over 100 lenders in the UK offering the Coronavirus Business Interruption Loan Scheme. So the choice of lenders is much improved.

Now in Scotland, it is even better as a proportion because before lockdown there were 22 lenders on the business bank website, there are now 72 lenders.

So, there is an additional 50. So that is giving you access to cash through the CIBILS scheme. Obviously, the Bounceback Loan Scheme has been put forward latterly, so that was the fourth of May. There are 20 lenders who are offering that scheme.

So, it is little bit more restricted in terms of who you can go to for that product. But if you are looking for anything between £2,000 and £50,000, still the advice is to talk to your existing bank because the likelihood is that your high street bank will be offering the Bounceback Loan Scheme, and it is probably the quickest and easiest way to accessing cash.

However, if you have a requirement for more structured cash and looking forward a little bit more, in terms of planning, through the Coronavirus Business Interruption Loan Scheme, there are a number of different categories of lender.

Invoice finance lenders and asset finance lenders

So, you have the Term-Loan lenders, you have Invoice Finance lenders, you have Asset lenders and you also have Revolving Credit lenders, or, as you and I would probably know it, the traditional overdraft. So, in terms of the Term-Loan lenders, there are 91, now, who will offer that service, in terms of Invoice Finance or specialist Invoice Finance, a lot of the high street banks will also offer it, but they are not on the British Business Bank website as
offering this as a specialist finance, but for Invoice Finance there are 18 specialist lenders. On the Asset Finance there are 21 specialist lenders.

Again, there may be some high street banks that would do that, but they are not listed. So, these are just specialists in that field. Revolving credit, you are looking at 20 lenders who are offering Revolving Credit facilities, so overdrafts or just kind of Term-Loans effectively, so a cash flow advance I think you might call that.

So it’s a twelve month facility and it will be reviewed at the end of those twelve months, if you want to renew, then you may be able to do that. But it is another way of accessing cash reasonably quickly.

In terms of the availability of getting cash through to any of these banks, really, because of the increase in the number of lenders, it has increased the likelihood that one or more lenders will be interested in your case.

So the early days of CBILS, where people were a little bit disillusioned with it as a result of the lack of access, and that access has been improved considerably. And it is not really being talked about very much in the press.

So I thought I’d better let you know that these schemes are still running and they’re still very much available for you to assist you through this difficult trading period that we’re going to encounter over the next probably 12 to 18 months, I would suggest.

So, hopefully that has been of help to you and that you can access the cash that you require through those schemes.

Finance broker support

I can help you with the CBILS scheme, Bounceback Loan, though I can’t really help with, in terms of the idea that we have to put you in touch with your existing bank.

But if you have no joy with that, then obviously the third option is to come to a Finance Broker who has access to probably a wider range of lenders who may not be offering that scheme, but who also may be interested in supporting your business.

So if that’s of use, I’m pleased, because we want to make sure that as many businesses as possible survive as we come out the other end of lockdown.

Call us today on 01383 624 425 or submit an enquiry and we will contact you.


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What’s the difference between an Overdraft and an Invoice Finance Facility?

I have been getting asked recently ‘What is the difference between an Invoice Finance Facility and an Overdraft?’

Well, here is the answer. An Overdraft is the most commonly used form of short-term finance, with 16% of SMEs in the UK having one. An overdraft has an arrangement fee to put in into place, you pay interest when you’re using it (no interest when you’re not), and it’s a short-term facility – generally 12 months and renewed at the end of the year.

So if you’re constantly at the limit of your overdraft facility, then there is always the danger that it could be construed as a long-term debt rather than a short-term facility and the bank could ask you to repay that, potentially by putting it into a term loan. At
which point, the benefit of having the overdraft, in terms of no capped repayment requirement and no monthly cost, is superseded because the loan now has a monthly repayment.

The alternative to that, as is often put forward and is a very different kind of facility, is the Invoice Finance Facility.

The Invoice Finance Facility provides you with money upfront on your invoices, before you get paid by your customer.

There is a monthly management fee which needs to be paid on the facility, and you pay interest as and when you are required to borrow money against the invoice. So, if you’re not borrowing against an invoice, then you’re not paying any interest.

I guess the best way to look at it is to compare two companies. So, if we’ve got two companies that are look to grow – company 1 has an overdraft and company 2 has an Invoice Finance Facility.

Now, company 1, when it grows, will grow using its overdraft facility, which is a set amount of money, and it will get to the overdraft limit and find that it starts to run out of cash as it tries to grow through that glass ceiling. So, it will need to go back to the bank and renegotiate the overdraft facility or potentially take out a loan in order to get to the next level of growth.

And then it may use up that finite amount of money as it continues to grow, and once again, it will have to do the same thing again and go back to the bank and try to renegotiate a new deal.

Whereas company 2, they have an Invoice Finance Facility. As they start to grow, they raise more invoices. The invoices then have money provided against them by the lender providing the Invoice Finance Facility which allows them to continue to grow, because the facility grows with them. It’s not the case of needing to renegotiate the facility every time the company grows, or needs more cash.

So an Invoice Finance Facility is a much more powerful way of actually growing your business without having to constantly worrying about reaching a predetermined limit set by the bank.

All that needs to happen is the business keeps growing, keeps selling, and keeps making a profit and the facility will grow with it. It’s a very powerful way of using the cash within a business in order to grow.

I’ve talked a lot about these facilities being very good for the survival of a business, which they absolutely are, but they are also very good for growth. I also think that they are very misunderstood in the market. The reason that I say that is that less than 1% of all UK businesses have an Invoice Finance Facility in place.

If you would like to get in front of other businesses by using an Invoice Finance Facility, if you have any questions, or would like the Financial Health of your business assessed, get in touch today and we can open a conversation.

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Bridging Finance, not just for property.


Bridging Finance is primarily seen as a property related bit of finance because it can be used to secure against property. That is one of the easiest ways of getting it, just on the basis that property gives the bridging lender a relatively understandable exit – in terms of how they are going to be repaid.

Bridging Finance can be used for business purposes as well. If you have a shortfall of cash but you know that you have got cash coming in in the future. Bridging loans are typically six to twelve months, though they can go up to twenty-four months, so it can be used for different purposes, if there is an exit strategy.

Now, the one thing to bear in mind with Bridging Finance is that whilst it primarily doesn’t need to be serviced, so you don’t need to make payments against it, what happens is that the interest that is building up is that it gets added up and then taken away from the original loan value that you have secured.

What this means is that your day-one draw down is actually less than the value of the loan, to the tune of the fees and the interest, so you really need to bear that in mind when you are arranging your finance.

The original main loan value will be based on the loan-to-value, but the actual amount of money that you will have in your pocket will be different to that, unless you can prove through your income that you are able to service the interest on a monthly basis, which then releases all of that interest from the loan into your day-one draw down. This allows you more money upfront, but you must make a monthly payment. The lender will require proof of how you are going to do that.

There are still lots lenders out there, and more lenders are coming into the market.

Coronavirus has had a little bit of an impact, in terms of some lenders have withdrawn from the market, but there are still plenty out there.

If Bridging Finance is something you are looking for, or considering, then it is still very much on the table. If you need Bridging Finance or want to discuss your options, fill out the contact us form on this website and we will be in touch.

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How far in advance should you plan your commercial finance solution?

Today I’m going to talk about the timescales involved for Tier 1, Tier 2, and Tier 3 commercial lending and commercial mortgages.

In terms of putting a case together, getting it submitted, getting a decision in principle, getting it credit backed (underwritten), and then the time it takes to go through the legal process in order to draw down the funds.

Timescales for commercial lending

The purpose of this is really just to give you an idea, if you’re looking to buy a commercial property, either as an investment, or for owner operation, or even a trading business, then these are the timescales that you are going to be looking at.

I’m going to break it down into tier 1, tier 2, and tier 3. This is slightly different to some other areas where tier 1 is actually going to be a Business Development Manager (BDM) that you’re talking to, so you are actually talking to a person, whereas tier 2 and 3 tend to be more portal based, particularly tier 2 – where it is either meeting criteria, or it isn’t. Tier 3 depends on the lender, but some lenders will be BDM and some will be portal.


So, on to the timescales. For a decision in principle for a tier 1 loan, using a BDM, you will most likely be looking at one to two days. For a tier 2, even though you would apply through a portal, you would still be looking at one to two days. If you were processing a tier 3 loan, you could have a decision in principle back in as little as four hours, though this could go up to two days. So, for all three tiers, it is best to err on the side of caution and plan for the process to take up to two days.

If you then want to get that decision in principle credit backed, because you are happy with the deal that’s offered, then that process can take up to 4-5 days, depending on how quickly an evaluation can happen, and then from evaluation and credit backing, the timescale to actually draw down the funds varies.

For tier 1, you can look at drawdown taking ten to twelve weeks, tier 2 can be eight to twelve weeks and for tier 3, you can expect it to take eight to ten weeks.

If you are thinking of going through this process, ideally, you should attempt to plan anywhere between three and a half to four months ahead of the time that you want the process to be completed. There is, of course, an option if you want to do it quicker.

You can look at Bridging Finance (which will be the topic of next week’s blog), so if you are unable to secure it within the time scale of the three and a half to four months, as long as the ability to refinance was there, you would be able to secure the asset quickly.

A lender for a bridge would want to know what your exit strategy for the finance was, and your exit would be to refinance. As long as you are able to show that you are able to refinance, then the bridge should be forthcoming.

If you want to discuss these or other business finance options, get in touch by filling out the contact form on this website and we can work out what solutions will fit your needs.