Sustaining Growth In Slow Periods With Business Loans For Working Capital

There are many reasons why businesses can slow down or experience low demand. It could be part of a wider economic downturn caused by political decisions or even global upheaval affecting supply chains. There may also be seasonal variations which influence customer demand, with high and low periods throughout the year. But whatever the reason, when things are slow it can be hard to find the resources the business needs in order to grow.

However, there are tools available to provide businesses with the capital required, even when the cash is not flowing in from other areas. A working capital loan for business is designed to cover the kinds of short term expenses businesses need to meet, as well as allowing them to take advantage of growth opportunities when they arise.

The Importance Of Working Capital Loans

It is estimated that around 60% of all British businesses experience cash flow difficulties at some point in their lifecycle. Businesses of all shapes and sizes need liquid capital in order to pay staff wages, purchase inventory and to deal with the expenses that always arise when taking care of daily operations. But when business is slower than usual, these everyday business costs can soon mount up and become an issue.

A working capital loan for business is designed to help organisations bridge the gaps between fluctuating revenue and essential operational costs. This could be essential for maintaining supplier relationships, paying rental costs, developing marketing strategies or trying to drum up new custom in slower periods.

Types Of Working Capital Loans

Not all working capital loans for business​ are the same, and it is recommended to examine all the options before making a decision. Some of the key types of working capital loans include:

• Short term business loans
• Business overdrafts
• Invoice financing
• Merchant cash advances
• Revolving credit facilities

How Working Capital Loans Sustain Growth

Working capital loans can help businesses sustain growth in a number of key ways. Primarily, they help them to maintain cash flow stability at times when external factors can cause this to slow down. Slow or late payments can also be an issue, costing SMEs around £23.4 billion a year according to the Federation of Small Business. This can obviously impact cash flow but can be combated with the right kind of financial support.

Growth opportunities can arise even during slow periods. This could include securing a bulk discount or launching a new marketing campaign but businesses need funds at these times to take advantage. The UK Finance Association found that nearly a third of all SMEs seeking finance are looking to invest in growth rather than just survive.

It is also the case that almost half of UK SMEs report unexpected costs as the primary reason for seeking external finance. If this happens during a slower period it can be tricky for businesses to find the capital to cover these expenses.

Strong supplier relationships are also the key to the success of many small businesses, and with many SMEs struggling to make payments it can lead to supply chain disruptions or loss of preferred supplier status, which can have long lasting impacts on the business.

To find out more about the best working capital loans or to discuss your financial options with our team, contact Century Business Finance today.

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