The No.1 reason most businesses fail

Running a business takes a special kind of person. A cast iron determination to succeed. The tenacity to make it happen. But sometimes even that isn’t enough.

When you’re starting out the odds of success are firmly in your favour: 91% of start-ups are still going strong after their first year. But fast forward a few years and that picture changes. After five years, only four out of ten small businesses are still trading. And after 10, it’s only a third.

It’s not surprising that many businesses fail. What is surprising is that so many are failing for the same reason.

And that reason is cashflow.

According to the Office of National Statistics, cashflow is responsible for up to 90% of business failures. BACS research shows that almost half of the UK’s small to medium sized enterprises are being paid late, with the average payment debts estimated to be £32,185.

But even this doesn’t tell the full picture. Thousands of businesses are trading less successfully than they could be, simply because their money is tied up.

Think about that for a moment. Businesses aren’t as profitable as they could be. Not because of the product or service they’re offering. Not because of a fall in demand, increased competition, or economic changes. They are failing because of the liquidity of the cash in their business.

Now that’s disappointing. And completely unnecessary.

That’s not to say cashflow isn’t a problem. Far from it. While you’re waiting for your customers to pay (for goods or services that it has already cost you to deliver) you still have overheads. Wages to pay. Tax to pay. Ironically, when businesses start to ‘do better’, they can find keeping on top of this can become even harder to achieve.

Cashflow issues aren’t just the preserve of small businesses. Large corporations also have to keep their money flowing. Yes, they have more revenue at their disposal. But they also have greater overheads. The difference is, successful businesses understand that cash is king. And they know how to get it.

What’s suffocating so many SMEs isn’t cashflow per se. It’s because they are focusing on the problem, not the solution. And that solution is funding.

Over the past 16 years we’ve lent over a billion in funding to businesses of all shapes and sizes, across all sectors. As an independent business ourselves, we understand how cash is essential in getting your business where you want it to be. We offer a range of funding options. All with competitive rates. All designed with businesses in mind. No hidden fees or early repayment charges. And the support of a dedicated Relationship Manager who will work to fit our products round what your business needs, not the other way round.

We’ve seen through working with businesses why so many struggled for so long. The ones which identified they needed funding often initially approached their business bank. You can see why they would; the relationship is already there. But what they found was that there is a limit to what the banks could offer them. Loans could take weeks to finalise, with an endless amount of hoops to jump through and paperwork to complete – with rates that weren’t even that competitive.

And that’s if they were accepted in the first place.

Since the financial crisis, the banks have really tightened their lending criteria. They also want smaller businesses to fit in certain boxes and prefer the more profitable big end of town.

We don’t operate like that. Our customers come to us (and stay with us) because we make funding easy. Whether you need to pay your staff on a Friday or get new orders out the door, we can have the funds you need in your account in 24 hours. And with our new Cash Advance the money can be in your account in less than 12 minutes.

The reason we’re able to act so fast is because we use the best data analytics available. We can quickly access a company’s trading history and find out everything we need to know to make responsible lending decisions – super-fast.

Businesses who come to us tell us the difference having access to instant funding has made to the way they operate. The pressure is instantly relieved. Their business is able to grow.

Funding gives you the power to say yes whenever you need to. That could be yes to new technology, new premises or even new staff. And when opportunities present themselves, you can seize them with both hands, because you know you can instantly access the finance you need to make it happen.

Yes, running a business does takes a special kind of person. But it also takes cash. If you’ve got the ambition, we can help with the rest.

Sources:
[1] http://smallbusiness.co.uk/business-fail
[2] http://www.managers.org.uk
[3] https://www.bacs.co.uk

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