{"id":5525,"date":"2020-05-15T15:31:59","date_gmt":"2020-05-15T15:31:59","guid":{"rendered":"https:\/\/swoopfunding.com\/ie\/?post_type=blog&p=5525"},"modified":"2024-04-15T12:24:54","modified_gmt":"2024-04-15T12:24:54","slug":"funding-amid-covid-19-alternatives-to-government-support","status":"publish","type":"blog","link":"https:\/\/swoopfunding.com\/ie\/blog\/funding-amid-covid-19-alternatives-to-government-support\/","title":{"rendered":"Funding amid COVID-19: alternatives to government support"},"content":{"rendered":"\n

By Damon Walford, CCO, Swoop<\/strong><\/p>\n\n\n\n

You’ll have read about the various measures<\/a> the Irish government has introduced to support businesses and sole traders<\/a> struggling with the commercial and cash impacts of COVID-19. <\/p>\n\n\n\n

But what if these support measures don’t suit the shape of your business? Perhaps, despite the pandemic, your turnover is taking a turn for the better or you’re looking to expand? Or you might have found out that you don’t qualify for schemes? <\/p>\n\n\n\n

<\/p>\n\n\n\n

So what are the alternatives to the government’s COVID-19 support measures? I won’t talk about business VAT deferment, credit cards or business overdrafts<\/a> here, as you’ll most likely have looked into these already. Instead, whether you’re after growth or simple survival, I’ve complied a list of ways in which you can improve your cash flow and boost your working capital as the pandemic unfurls.\u00a0<\/p>\n\n\n\n

I’m covering lending, equity and cost-cutting here. <\/p>\n\n\n\n

First, lending. Rather than taking out a straightforward working capital loan, you might benefit more from invoice finance (raising cash against invoices) or asset finance (e.g. leasing) facilities. If you’re trading internationally you might also look at different types of trade finance to help you secure your supply chain or get paid earlier than you might otherwise. And if your revenue is looking good, but you can’t (or don’t want to) bag a loan, you might consider a business cash advance. <\/p>\n\n\n\n

Second, you might be in a position to attract equity investment. Investors are still looking for opportunities \u2013 and we’re currently working to get a number of our customers’ investor ready. <\/p>\n\n\n\n

And, third, I can’t write a blog about funding without highlighting ways that you can cut your everyday costs.<\/p>\n\n\n\n

1. Lending alternatives to the government-backed funding schemes<\/strong><\/h3>\n\n\n\n

Invoice finance <\/strong> <\/p>\n\n\n\n

If you\u2019ve issued invoices to your customers and these haven\u2019t yet been paid, invoice finance unlocks this money early. In other words, you borrow money against your unpaid invoices (accounts receivable). <\/p>\n\n\n\n

This might be helpful if, for example, you’re taking on a large, new contract and you want to finance a specific invoice (selective invoice finance). If the contract is with a new customer, you might prefer to outsource credit control to your invoice finance provider (factoring).<\/p>\n\n\n\n

With all types of invoice finance<\/a>, rather than waiting for your invoices to be paid, a lender will advance you most of the value immediately \u2013 so you’ll get paid faster for completed work. A lender typically advances you up to 95% of the value of your invoices, with most of the other 5% paid to you later. (You pay a small fee for the privilege).<\/p>\n\n\n\n

Asset finance<\/strong><\/p>\n\n\n\n

Don’t buy it, lease it! If you need computers or other business equipment, consider leasing<\/a> them rather than using up cash reserves. You can expense the lease costs when you calculate your business taxes. And if you have an existing lease, see if you can negotiate better terms.<\/p>\n\n\n\n

The question to ask yourself is: what has this enforced global experiment taught you about the way you and your employees work? More specifically, since we\u2019re talking about finance here, what equipment do you need to buy in order to make your business more efficient and flexible longer-term, especially if a significant proportion of your workforce might be working from home and might need more than a laptop?<\/p>\n\n\n\n

You might also want to consider raising finance against the assets your business already owns<\/a> \u2013 sweat you assets.<\/p>\n\n\n\n

Trade finance loan<\/strong><\/p>\n\n\n\n

If you\u2019re dealing with international buyers and suppliers, a trade finance loan<\/a> can give you the cash you need to buy inventory or stock from a supplier in order to fulfil an order. Let\u2019s say you have a confirmed purchase order from a customer and you want to either import stock (or inventory), or export products for resale. A trade finance lender can pay your supplier (in this case the exporter) before you (the importer) receive the goods. <\/p>\n\n\n\n

In addition to raising a loan against your imports, you might also want to discount the invoice and get paid early. <\/p>\n\n\n\n

Business cash advance<\/strong><\/p>\n\n\n\n

This could also be a good option if, for example, you’re confident about your turnover but you’re struggling to get a loan (perhaps because of a poor credit rating). <\/p>\n\n\n\n

A business cash advance<\/a> is a type of lending that’s based on your future revenue. You’ll also hear it referred to as a revenue loan, a turnover loan or revenue-based financing. It’s useful because the lender takes repayments as a proportion of your revenue. This means that when things are going well, you pay more back each month, but if your business is going through a lean period you pay a smaller amount. <\/p>\n\n\n\n

It’s worth noting that business cash advances are more expensive than bank loans. <\/p>\n\n\n\n

Working capital loan<\/strong> <\/p>\n\n\n\n

Over the past few months we’re seen demand both from <\/s>businesses looking to invest or fund new contracts and from businesses who need short-term or medium-term loans to help meet their day-to-day operational needs (e.g. paying suppliers, creditors, rent, payroll) out of cash flow. <\/p>\n\n\n\n

We’re seeing a lot of demand in particular for unsecured<\/a> loans in the \u20ac100,000 to \u20ac250,000 bracket. Of course you stand a better chance of getting an unsecured loan if your business has a high credit rating, though you might be asked for a personal guarantee. Any lender will look at your historical trading performance and the underlying viability and strength of your business pre-COVID-19. <\/p>\n\n\n\n

Read more about working capital loans here<\/a>.<\/p>\n\n\n\n

Revolving credit line<\/strong><\/p>\n\n\n\n

You might not need it right now, but a line of credit is an easy way to delay cash flow problems and give yourself a bit of headroom. Think of it as an insurance policy. You might be able to get a line of credit using your accounts receivable or your inventory as collateral.  One appeal is that you don’t have to commit to a loan, as you would with most of the government-backed lending<\/a>.<\/p>\n\n\n\n

Re-bridging loan<\/strong><\/p>\n\n\n\n

If you’re looking to refinance an existing bridging loan<\/a> at a better interest rate, or if your existing bridging loan is coming to the end of its term, you have two options:<\/p>\n\n\n\n