“I own a small business and feel now is the time to invest in and diversify the company. However, I am conscious of putting pressure on cash flow while market conditions remain tough. How can I make the investments I need without draining working capital?”

Understandably, overcoming the challenges presented by the economic slowdown has been the focus of many businesses in recent months and maintaining a healthy cash flow has been central to financial management.

However, you’re right to consider making strategic investments now in order to prepare effectively for the long-term future of the company and ensure it is in a position to prosper when market conditions improve.

By diversifying your products and services, implementing new systems or targeting new markets you could gain a crucial competitive advantage and emerge from the recession in a stronger position.

Implementing these investments can put pressure on cash flow, so it is vital you secure the right funding solution to support your firm’s ambitions.

A highly effective way of supporting growth without drawing on working capital is asset based lending (ABL).

ABL enables businesses to quickly inject funds into the company and boost liquidity by leveraging the value of existing assets such as sales ledgers, property and machinery.

Using this form of funding, management teams can focus on strategies such as:

1. Diversifying products and services. ABL releases the cash to invest in the research and development needed to generate new product advancements, without putting pressure on working capital.
2. Improving efficiency. Companies can release significant amounts of capital using ABL, which can be invested in machinery and infrastructure.
3. International expansion. Favourable exchange rates are creating opportunities for UK firms in the export market. ABL is capable of bridging the gap between work completed and the receipt of payments, enabling businesses to focus on their international expansion without worrying about the impact on cash flow.

Whichever investment strategy you chose to follow, it is important to work closely with your funding partner and updating them with the company’s plans, so they can provide the best solution for the company’s needs.

Jonathan Myerscough, Regional Manager
August 2009