Business Finance. Help please.

Sarah Howard · #1 26-01-2010, 09:14 AM

I have just had a call from my bank who have refused to renew my overdraft facility which my business relies on at various times in the year. Is there an alternative way of financing my business as this will have serious impacts on our chances of staying in business?

IP · #2 26-01-2010, 09:46 AM

Hi Sarah, welcome to FBF

I would always advise businesses to attempt to retain enough capital to avoid using overdraft facilities, which are costly and risky.

Alternatives that you may wish to consider are either taking a loan which gives you more control or selling a stake in the business to raise the capital you need to see you through those times of the year....better to have some of something than all of nothing.

There could be further options such as reducing any credit you offer or negotiating longer credit terms with suppliers, but without knowing the cause of your need for the overdraft, such advice could be premature or unsuitable.

Maslins · #3 26-01-2010, 09:58 AM

You say you rely on it at various times of the year...which is obviously much better than permanently sitting at the overdraft limit.

If you're otherwise happy with the bank, I'd stick with them. Over the longer term, perhaps try to keep a little more money generally in the business (eg take a lower salary/drawings for a little while).

In the short term, during the poor cash flow months ask your creditors for extended terms/ask your customers to pay up front. Perhaps do an interest free balance transfer on a credit card, or ask about small business loans.

EDIT - started typing this a while ago, so sorry it partly duplicates IP's answer!

seanstevens · #4 26-01-2010, 08:36 PM

Quote:

Originally Posted by Maslins

In the short term, during the poor cash flow months ask your creditors for extended terms/ask your customers to pay up front. Perhaps do an interest free balance transfer on a credit card, or ask about small business loans.

If you are going to ask for extended terms then you need to be realistic what you ask for and do it in a genuine way. I reject 9/10 requests for extended terms in the day job because I do not feel that the person asking is being 100% honest with me. I want them to give me details of why they want or need the extended terms and how long they need them for. People that just say "our new standard terms are xx" get an automatic reject and people that say "we are having a few problems....." get a reject and their credit account removed. So always best to talk directly to the credit manager (if they are a big enough company to have one) and explain that just for the next x months or orders it would be appreciated so that you can cover some deals you have going on etc... you need to lie in a genuine way.

johnathanb · #5 28-01-2010, 10:11 AM

Do you have an accurate cash flow forecast?

also

Have you stayed within the terms of you existing overdraft, ie have you upset the bank in anyway?

blicks · #6 09-03-2010, 10:43 AM

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Business Finance. Help please.

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