The biggest lie we’ve been fed is debt is bad.

And from this, many business owners miss out on smart ways to rapidly grow their business, fix problems and increase their net worth.

Sure debt can be bad when it’s in the wrong hands and used for the wrong circumstances. But debt can also transform your business overnight. Help you to stay competitive and paradoxically grow your own wealth.

But first, let's examine why debt can be bad. Take personal and consumer debt as an example. It’s typically spent on depreciating assets to ‘keep up with the Joneses’ and doesn’t have any tax benefits. Therefore this debt ‘costs you’ in the long run.

When thinking about debt, a general rule of thumb is this. If it has tax benefits, can be used to purchase an asset class which generates revenue for you, or enables you to buy stock, buildings and companies - then this debt is generally healthy for you.

And here's why: You and your business have an ability to tun £1 into something worth more. It could only be worth £2, or £10, or even £100. But this is only possible when you have positive cash flowing through your business. Giving you a money-making machine.

Now your revenue and profit maybe healthy on paper. But without cashflow, your options for growth are limited. Your finances need to be more strategic than needed. Ultimately slowing down what you can invest in, and who you can hire to help reach your business goals.

How to tackle cash flow problems - reduce your debtor days

Reduce your debtor days

The first thing you should look at is your debtor days. How long does it take to receive payment from your invoices? Is it less than 30 days? Or are you waiting upwards of 90 days? Do your customers only pay when they place an additional order with you?

You know the money exists, but it is yet to be recognized. Maybe you’d prefer to keep your customers on your good side so they don’t go elsewhere? Or perhaps you don’t have the internal resources to chase invoices? Or maybe you do, but they don’t listen anyway?

In this instance, Invoice factoring is a perfect solution for your needs. Your invoice is paid every month by your factoring supplier. And your supplier collects the payment directly from your customer or from you when you receive payment.

The great thing about invoice factoring is you reduce your opportunity cost of doing business. As money pours into your business faster, you’re given that agility to react to market conditions faster and take advantage of unique opportunities which present themselves.

Buy your asssets with finance

You wouldn’t pay your employees 3 years salary upfront, so why are you doing the same with your assets? When you think of employees and equipment you purchase for your business. You acquire them because they will be a net positive for you.

Both employees and assets generate additional income for your business. This could be direct sales, saving time and making processes more efficient, or simply helping to prevent losses. Yet, businesses pay for employees and assets differently for the same job.

When you buy an asset with cash you restrict your future options by damaging your cash flow. So isn’t it better to spread the payment - and make your new assets pay for themselves? Especially when the ROI generated from your new assets is typically higher than your repayments?

Asset finance it is treated as a tax-deductible expense. So If you sat down with your accountant and looked at the multiple options of purchasing your assets. You’d be surprised to see over the long term asset finance works out to be the cheaper route to purchase.

How? Along with tax-deductible finance, you also greatly enhance your return on capital employed (ROCE). What this basically means is, because your cash flow will be enhanced, your business is in a position to make more money, now that your cash isn't tied into one investment.

Get a direct cash flow injection into your business

Sometimes businesses need a cash flow injection. This could be because your business is going through a slow period? Maybe you need to buy raw stock to sell more products? Or it could be that you have existing debt you’d wish to consolidate?

Unsecured loans are great for such projects. They can be incredibly fast to acquire. Can have short and longer terms of repayment and are a straightforward procedure. And you don’t necessarily need a strong credit rating to take advantage of unsecured loans.

Because of the flexibility of Financial Brokers, we can help you source a funder who is likely to take your financial application. This is due to a preference of your industry and having a deeper understanding of your operations.

Alternatively, we are in a position to advise and connect you with thousands of independent global investors via P2P lending. This is a new form of financing that removes the bureaucracy of traditional banks. Making access to finance a simpler process.

By now, you should understand that business debt can be good for your growth. It can be a cheaper way of purchasing assets, and it can help boost your cash flow so you can take advantage of unique opportunities.

If you’d like to explore a way to boost your cash flow so your business can remain more agile. Give Financial Brokers a call today