Cash flow woes? 5 ways restructuring your loans could make all the difference

By Sophia Auld

If your small- to medium-sized business (SMB) is experiencing cash flow trials, you’re not alone. In fact, a recent Xero report found whilst stabilising, Australian SMBs are regularly being paid late. Furthermore, businesses who wait longer for payment grow a third more slowly.

Adequate cash flow is essential for meeting your financial commitments in a timely manner and having working capital available should an awesome new project or client opportunity crop up. Fortunately, you’re not doomed to be forever at the mercy of invoices!

Loan restructuring can be an effective way to manage cash flow, control debt, and capitalise on new loan products and deals. Here are 5 ways it could boost your business.

1. Save money, time and hassle by consolidating debts

Having several debts across multiple lenders is common for SMBs. However, needing to make payments at various times each month, quarter or year can impact cash flow – not to mention add time and stress to staying on top of your finances. Consolidating debts with a single lender helps with budgeting and cash flow management, while enhancing business efficiency. You could also consider consolidating personal and business debts to one lender, while keeping separate accounts. This helps you easily track your overall financial position and move funds quickly between accounts.

2. Better interest rates

Another common reason for debt restructure is to take advantage of better offers. Interest rates are constantly changing, and there’s often no reward for loyalty to your lender. SMBs can benefit from special deals and rates lenders offer to new customers, and potentially save money by moving to a loan with a lower interest rate. There can be costs involved in switching deals, however, so speak to your finance professional to make sure the benefits outweigh any extra charges.

3. Optimise your use of credit

Products like lines of credit and overdraft facilities can be a great way to stretch your outgoing costs. A line of credit, for example, may allow you to save interest while money is in the account, and draw down finance as needed. It’s important to use credit solutions wisely, though, as there can be high penalties for things like overdue payments and accidentally drawing down more than your limit.

4. Switch to a loan that better suits your needs

As an SMB, it’s likely your business looks very different now to when you started out. The loan that was perfect for start-up might no longer be a good fit. Switching to a new solution could help your business better manage current circumstances – or gear up for a growth phase.

5. Consider a cash flow loan

If you get into a cash squeeze, or you need extra funds to grab that opportunity you’ve been dreaming of, a cash flow loan could be the answer. This type of financing is based on your business’s historical and projected earnings and doesn’t require physical collateral. Cash flow loans come in different types, such as invoice finance.

The most important thing is finding a cash flow solution that meets your needs, which will depend on factors like your business structure and future goals. Your finance professional can help you find the right answer for your business.

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.

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