3 Things You Must Do Before Applying For Business Finance

3 THINGS YOU MUST DO BEFORE APPLYING FOR BUSINESS FINANCE Funding and Business Growth Playbook T: 0330 350 3356 @: hello@GrowingYourNumbers.com www: growingyournumbers.com

Creditor Days: How long you take to pay your suppliers

Stock Days: How many days stock you have tied up in your business

These are incredibly important, because how you manage these three Business Drivers has a direct impact on total Working Capital or Cash you will need to run your business.

Depending on the type of finance you end up applying for, to a greater or lesser extent, this will be one of the key factors lenders will look at when deciding how much risk is associated with lending to your business.

Debtor Days and Accounts Receivable: If you provide your customers with credit, your Accounts Receivable is the total amount of your money you are owed by your customers.

There are huge differences between how long customers take to pay. Even for businesses that in every other regard are identical, how long it takes customers to pay varies considerably. Businesses with a professional ‘Credit Control’ process enjoy a distinct advantage over those that don’t . Why? Because their business needs less working capital or cash to run and ironically, they will find it easier to access finance when needed, and they will receive better terms. What’s a Debtor Day? Each Debtor Day has a financial value, in the example used below, for each day Debtor Days increase or decrease, this has a cash impact of £2,702. If each day equals £2,702, a one-day decrease in Debtor Days, will reduce the bank balance, and a one day increase in Debtor Days will decrease the bank balance by that amount. Just think: A 10-day reduction in Debtor Days would have the same impact on the business as borrowing £27,020. Without interest or repayments, no personal guarantee, no security and ironically the business’ s credit rating will also be better, more about credit ratings in a moment.

Think of Debtor Days and Accounts Receivable like this: You are lending money to your customers

Your customers are using you as a bank, all too often, they are borrowing money from you at 0% interest (rather than borrowing money from their own bank). If you are like most businesses, you are doing exactly the same thing, which brings us to Creditor Days … There is only so much we can cover in a short introduction. To find out more and to obtain your step-by-step checklist of things you can do to reduce Debtor Days and put cash in the bank, most of which will cost you nothing what-so-ever to implement, register to join the upcoming Funding and Business Growth Seminar.

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