Back in 2001 I took over running a business that delivered market intelligence, globally, in the technology space. Our main costs were staff, staff and staff (ok, a chunk of property and IT costs as well).

 

It was a well-respected business with several hundred largely happy staff, but then we got hit with the DotCom crash. High spending Telecoms and IT businesses stopped spending, or worse. So many customers went bust, that we even named our in-house band the “Chapter Elevens”.

 

Customers still spending were suddenly taking 3 months to pay, while we had to manage a big payroll that got paid monthly. We needed finance to cope with this sudden hit on our cash flow, and to sort our salary bill out. The Bank didn’t see it that way of course, and asked for a reduction in our facilities. Ouch!

 

In the end we survived this stomach churning period by persuading our best customers to pay us “up front” rather than after three months. They loved what we delivered to them, and also knew our long track record. I am forever grateful for a certain German Mobile operator that paid us a full year’s contract up front, rather than quarterly in arrears.

 

That German company effectively helped finance us, using their knowledge of us as a business. They did a far better job than our Bank in reality. The nature of the business I ran meant it was very difficult to get more credit from those who supplied us – in fact out Landlords were more aggressive about delayed payments than ever!

 

This story takes me to the wider issue of the Working Capital challenges that even the best run small business face – financing what you build and sell to your customers. It is the subject of our Informed Funding seminar on Improving Working Capital & Your Digital Financial Footprint on 26th February from 9:00am - 11:30am near St. Paul's Underground Station. 

 

Click here for more information or to register for Improving Working Capital & Your Digital Financial Footprint

 

If you are a company that sells to other businesses (“B2B”), say with a £1m annual turnover, it’s not unusual to be in a position where you are having to find the cash to cover £250,000+ of “Working Capital” (and that amount gets bigger as you grow!). That is a figure that is very hard to find in terms of “standard” finance – particularly bank loans or overdraft. “Working Capital” is the cash you have tied up in debts from customers, stock LESS what you owe suppliers.

 

So, how do you deal with this situation? There are two ways, with the first being to improve your financial strength in the eyes of customers and suppliers – in essence, how can you be seen as less risky? Unless you have a proven track record with a customer or supplier, your risk is assumed to be “absolute” (ie, zero credit), or a risk score based on financial and other information that appears in credit rating information.

 

During the first part of our seminar, we will focus on the issue of improving your credit rating, with the assistance of the team from Experian – one of the main players in the business information market. They will be sharing with you what information credit agencies carry and how you can improve the information held on YOUR business. Not only that, but it’s a chance to understand how you can access information about the people you do business with.

 

All attendees at the seminar will get the chance to use the Experian Service for free as well – normally something that (large) businesses are keen to pay for.

 

The second way of addressing the working capital challenge is to use specialist finance that converts what you are owed into cash, quickly – achieving the same results I achieved through heavy negotiation with a German Mobile phone business!

 

In essence this means borrowing against what you are owed, and this is a long established method of financing. In fact, £Billions of finance is sourced in this way, and through an increasingly wide range of products that can suit a whole range of scenarios. Our panel at the seminar will provide an overview of this market, and answers questions on what type of “asset finance” might suit your business – the advent of Alternative Finance Platforms has further increased availability and speed of processing.

 

The panel has a wealth of experience and can also give guidance on issues such as financing overseas business and negotiating better deals with your customers and suppliers. I will also be there, and very happy to share my experiences as well!