Cashflow Pressure… it’s hectic, hey?
Supplier calls are daunting, stock decisions become more difficult to make and payroll week is dreaded.
Ja no, we get it.
Bizcash works with South African businesses that need funding for working capital, cashflow gaps, growth opportunities or a better way to manage existing business debt. We’ve supported over 6,000 businesses and paid out more than R3 billion in funding, so we’ve seen how often the real pressure sits in how the funding is structured, and how quickly “we needed the money” can turn into “sjoe, these repayments are hurting.”
What’s most important during these situations is making sure your business has the right funding structure.
Instead of another neat list of “10 funding tips”, we’re going to share two anonymised client stories from businesses that needed a better way to handle cashflow pressure.
Story 1: A Debit Order Working Overtime
A client had taken a R1 million facility from an alternative lender. At the time, it helped them get through a working capital gap, so no one treated the facility as the problem.
The pressure came later, through the repayment schedule.
Every business day, R4,261 left the account. By month-end, that added up to around R106,840.
The owner didn’t need a dashboard to feel that hit. The repayment had taken over every decision. Even though the business still had work coming in, stock purchases needed more caution, hiring plans slowed down and growth opportunities had to wait.
The business switched the facility for a R1 million overdraft structure.
The monthly servicing cost came down to around R22,843.
That freed up roughly R83,997 in monthly cashflow.
They went from rigid daily repayments of capital and interest, to just monthly interest-only repayments.
By switching the structure of their business funding, they had access to working capital when needed and had more control over how cash moved through the month.
It’s important to consider that a funding facility can look useful on approval day, and still become heavy once the repayment rhythm starts hitting the bank account.
Story 2: *Assets have joined the chat*
Another client came to us, again with cashflow pressure, but with different circumstances.
Their margins had narrowed and banks couldn’t see past the tight cashflow. They had been presented with a “No”, or options that proved either too expensive, or not fitted to their situation.
They felt as though they had hit a wall.
After we dug a bit deeper together, turns out, this was an asset-rich business, which seriously changed things.
The client leveraged their asset base with secured lending, and were able to get the right funding for their business.
With suitable security in place, the risk profile changed, which helped create a more favourable funding structure.
Assets can do so much more than sit on a balance sheet.
Used correctly, they can support working capital, ease cashflow pressure and help a business avoid expensive unsecured debt.
Both stories come back to structure.
The amount approved matters, but the way funding behaves inside the business matters more.
Repayment timing, flexibility, security and cashflow fit can change what the business can actually do with the capital.
This article was authored by Bizcash, our trusted Distribution Partner. If it has got you rethinking your funding, pick up the conversation with them. Reach out to Bizcash 0861 93 93 93 or [email protected]