Cash flow solutions, not band-aid financing fixes
May 19, 2021
Business funding should not be just a short-term fix.
Sure, clients sometimes need a quick win to improve cash flow and get out of a jam — what we call band-aid financing. But the better approach is looking at how to maintain adequate working capital consistently, without fail, for assurance that your company will be able to handle any financial curveballs.
The vision that drives us at Blacksail Capital Partners is to stand by our personal and professional character. “Character counts,” as we say, and it is so true in B2B lending.
Whether it’s providing honest feedback on a business’s financial potential or looking through a different lens at a working capital challenge to find a creative way of structuring a deal, these are the core strengths intrinsic in our approach. Lending companies need to be dedicated, persistent, reliable and trustworthy. They need to walk the walk, and be looking out for the best interest of their clients.
Who’s on deck?
The key is finding that partner in advance — essentially scouting them and then having them ready in your partner lineup, so you can call them to the field at a moment’s notice.
At Blacksail, we have these conversations with partners and future clients on a daily basis. We’re happy to walk you through the process of how we work, our solutions, funding structure and additional support options so that you can feel confident in your choice. Just like you, we want to work with people and companies that will be successful and provide us a stable foundation for ongoing growth.
When choosing your partner, in finance or any other area of the business, the greatest lesson is to ensure their values match yours. Only once you’ve deemed your partner has the right character traits, should you begin to focus on the dollars and cents.
A wide range of financing options to avoid band-aid financing
With that said, a financing partner that is able and willing to provide the necessary capital to a business, at a fair rate, is a good start. However, businesses often need far more than a lump sum that they have to pay back in instalments.
Here are some of the more innovative alternative solutions an ideal financing partner can offer:
This is where a loan is secured on a company’s capital (rather than strictly based on its cash flow or credit rating). The capital could include a company’s inventory, accounts receivable, its property or equipment. Many medium-sized businesses may need a finance partner that is able to provide up to $30 million in asset-based lending.
This is the process of selling invoices for an up-front cash payment. This is not a loan as such, so there are no ongoing, high interest rates to pay or a rigid repayment schedule to meet (the lender simply charges a flat fee). This is an extremely useful financial resource for companies that need to access cash quickly and/or need an efficient and cost-effective way to improve their cash flow.
There are two key advantages to this kind of financing. Firstly, equipment leasing can help improve cash flow by allowing companies to pay instalments on equipment and vehicles, rather than paying for them in a large lump sum. Secondly, the full amount of the lease payment is tax deductible, which can have a considerable positive impact on a company’s final tax bill.
This involves revolving lines of credit made available to consumer and commercial finance companies. These finance companies will typically need lending lines of up to $30 million.
Cash flow lending:
Typically, this is a loan used for a company’s day-to-day operations and is paid back from incoming cash flow. Many companies need loans of up to $15 million.
Your business deserves great partnerships
Even with good ‘funding levers’ to pull, you always want to be standing with a funding provider who sees themselves as a true partner — not just a transaction. Some may appear to have the right approach on the surface, but could structure their support in ways that are advantageous to them — not you.
This is your business. You have a lot riding on it. Requiring true character in your partners is mission-critical — and non-negotiable.
If you’re looking for a long-term financing partner and not just a band-aid financing approach, please contact us today. We’re happy to chat.