Businesses have used overdrafts for hundreds of years but you may not be aware that the concept was invented here in Britain – in Edinburgh to be precise.
In 1728, a merchant called William Hog approached the Royal Bank of Scotland as he had a problem – a cash flow problem. Although he had a profitable business he was under pressure to pay bills because he was awaiting payment from his own customers. The bank allowed payments to be made despite the fact that the bank account was empty. This “slipping into the red” or overdrafts was a temporary situation for a few days at a time and was repaid on each occasion from anticipated funds. William Hog temporarily changed from being a depositor to a borrower.
These days it is hard to imagine businesses operating without overdraft facilities (although some do), but there has been a gradual reduction in the use of overdrafts.
Bank of England data reveals that £5 million worth of SME overdrafts have been cut most days for two or three years since 2011, although it is now stabilising. This probably started initially as a consequence of the banks seeking to reduce the risk on their own balance sheets but then business owners themselves lost confidence and the appetite to borrow.
The good news is that confidence is back. Businesses are investing to meet demands of a growing economy – and that takes cash. The banks are lending but they are being very selective. If you are running a business and the bank won’t help what options are available? There are plenty.
All types of plant, equipment, fixtures and fittings can be purchased using a variety of flexible asset finance products. Existing assets can be re-financed. This applies to a whole range of industries. Everything from shop fittings and display counters through to heavy engineering plant, commercial vehicles, IT equipment and agricultural equipment – there are finance and leasing products to suit all.
If you are in a B2B business, debtor finance such as invoice discounting and factoring can address your cash flow needs. But it doesn’t stop there. Peer-to-Peer lenders and Crowd Funders and other specialist lenders have emerged and evolved to fill funding gaps. There are niche lenders some of whom are only accessible through intermediaries.
In fact, in an ever-changing market there are so many lenders, it has become a minefield knowing which is best suited to your needs. If you’re not sure or don’t have time to shop around, it’s best left to experts to obtain quotes for you.
If you are thinking of raising cash for your business contact us now for a free confidential chat.