"Among those small business owners who have had cash flow issues, nearly a third (32%) have been unable to either pay vendors, pay loans, or pay themselves or employees," the survey found.

One way in which SMEs can bridge the cash flow gap is to leverage their assets to obtain capital - an option which many business owners may not even realize is available.

Here are three hidden assets you can potentially tap into.

1. Invoices

When SMEs sell to large wholesalers or retailers, they must often wait months for payment. It could be 30, 60, 90 or even 120 days. All the while bills remain unpaid, and business owners are unable to pump money back into their company. This leaves them with their hands tied and can put a strain on growth initiatives.

Debtor Finance (also known as Invoice Finance or Invoice Factoring) involves using your outstanding accounts receivables to secure a line of credit. Here’s how it works.

First, you send the same invoice to both your client and your lender. Once the invoice is approved (which typically happens within 24 hours), the lender will pay you a cash advance of up to 95% of the value of the invoice upfront, less any fees. You will receive the rest of the money once your client pays the invoice in full.

Rather than waiting to get paid by a client, Debtor Finance allows you to accelerate the process and gain access to the money much quicker. That way you can maximize your cash flow, keep reinvesting into your business and save yourself a lot of hassle.

Because of the convenience it offers, Debtor Finance is becoming an increasingly popular financing option.

The Benefits of Debtor Finance

As previously mentioned, approval typically takes place within a day of uploading an invoice, making it much quicker than most other types of financing. If you need a cash flow injection in a hurry, this is a great method to use.

And because Invoice Finance is secured against your accounts receivable, there’s generally no need for real estate security, so you don’t have to put valuable personal assets like your family home on the line.

Finally, it offers a lot of flexibility so you can grow and adapt to increasing revenues, as Ribs and Roast did. Debtor Finance is extremely scalable, and a lender can act as a reliable partner who helps you seamlessly move through the various stages of business growth with ease.

2. Property

Another option is property secured lending, which allows you to access additional funding against your plant or property. This is where you use your existing assets to secure finance, which can be a smart move if you currently own a manufacturing plant or commercial property. If you’re already using an Invoice Finance facility, this lets you obtain additional flexible working capital by using a significant plant or property as collateral.

Here’s an example.

Say you’re already using Invoice Financing* to generate working capital and increase your cash flow. This would enable you to obtain a line of credit that’s secured by outstanding invoices. But if you were looking to increase your amount of funding and accelerate business growth even more, you could also use secured business finance by leveraging the factory you own. *(Also known as Debtor Finance and Receivables finance)

This would be considered a significant piece of collateral, and many lenders would have a strong interest in giving you more money upfront to facilitate growth.

3. Business Equipment

Asset Finance also allows you to use business equipment as collateral to obtain funding. Business loan expert Andy Wise breaks equipment assets down into two main categories — hard and soft.

Hard assets include:

• Light commercial vehicles (passenger cars, utes and light trucks)
• Heavy commercial vehicles (tractor vehicles for towing and semi-trailers)
• Manufacturing equipment (metalworking machinery, cranes and hoists)
• Agricultural machinery (tractors, harvesters and backhoes)

Soft assets include:

• Audiovisual equipment
• IT hardware and software
• Point of sale (POS) systems
• Medical equipment
• Office furniture

Just as with using property, if you were already using an Invoice Finance facility, you could access even more working capital by using equipment as collateral. That being said, certain assets and items of equipment will be considered much more strongly as security than others.

Scenarios for Leveraging Property and Equipment

There are three main scenarios where Asset Finance would make sense. One is when you’re looking to raise additional finance for growth. Maybe you’re experiencing a major spike in consumer demand but are hindered by limited cash flow or the size of your current factory. Leveraging your property and equipment can provide you with the cash flow injection you need to spark growth.

Another is for a buyout. If you need to finance the buyout of a partner, it’s not always easy to fund it on your own. Coming up with the money needed upfront can be a daunting task even for the healthiest of businesses. But the cash flow you generate with this form of financing can help you quickly raise the capital needed to make the buyout a reality.

Third, it’s perfect for the sale of a business or merger/acquisition. If you need a large sum of money to purchase another business, leveraging your property or equipment is a viable solution that can get you what you need.

The Benefits of Asset Finance

Asset Finance gives you flexible repayment options including interest-only periods. This eliminates a lot of the stress and headaches that often comes along with traditional bank loans where repayments are extremely rigid with little leeway.

Asset Finance also comes with flexibility in funding. For instance equipment financing allows you to fund new and aged products, or imported equipment as a combination with a Trade Finance solution, and can be funded after purchase or used for capital raising.

It also tends to be easier to obtain than most other types of loans and lines of credit. Banks are known for being highly selective about who they choose to give money to these days.

Asset Finance can help you gain a competitive advantage, creating an avenue to generate additional working capital. If you’re facing close industry competition, this can definitely give you an edge.

Capitalising on Your Hidden Assets

Your hidden assets are an effective means of obtaining the cash flow that is vital for SMEs. The solution to your cash flow problems may be right under your nose.

Using one or more of the hidden assets mentioned here can help you access the capital you need to grow and take your business to the next level.

We offer a range of flexible finance solutions to help businesses access the capital they need to grow. Speak to us today to explore your funding options.

Feel free to contact us for anything that relates to your business finances so we can help with your success.