We all know how the old saying goes…when it comes to running a business, cash is king. Steady cash flow ensures your business can cover it’s overheads while continuing to grow. However, many businesses hit a snag when there’s a lag between forking out cash for overheads and receiving money in from customers. This can limit your ability to expand your business.
There are a number of ways to manage cash flow issues and ensure a steady stream of cash entering your business at all times.
1. Cash flow projections
Every business should put together cash flow projections as part of their annual budget. If your business is seasonal and has a few months where there tends to be a lull in business, cash flow projections can help you prepare and plan for dry spells.
2. Get paid sooner
Sometimes the issue is not a lack of sales but payment terms or customers who try stall paying. There are some simple ways you can try get paid faster which include:
Early settlement discounts (e.g. 5% off when settling in 7 days)
Take deposits at order placement if lead times are longer
If customers don’t pay cash up-front, run a credit check before taking them on as a client.
Put old stock on sale to try get rid of redundant inventory
Send out invoices promptly and send frequent reminders
Charge interest on late payments, ensure this clause is in your T’s and C’s.
If the same customers tend to always pay late, change your terms to cash on delivery for any future dealings with them.
3. Get Smart About Overheads
It’s important to try and get most of your money in BEFORE your expenses are due to be paid out. If suppliers offer 30 day terms, don’t pay on day 15…pay on day 30 once you know most of your income will have hit your account.
If you can, pay your bills using a company credit card. Many offer up to 55 days interest-free which means you’re up to date with your suppliersand you’re not stretched financially. It’s important to stay in their good books. If you ever foresee payment having to be made late, let them know well in advance so they too can manage their cash flow.
4. Unsecured Business Loans
Sometimes even with fine-tuned cash flow projections, chasing payments and carefully managing overheads, businesses still run into cash flow issues. Nobody predicted the Covid-19 pandemic while budgeting last year, for example and despite their best efforts, many business owners find themselves in need of cash, NOW!
The quickest way to get business bridging finance is through an unsecured business loan. You can get access to a cash loan of between R50 000 up to R5 million in as quickly as 1 business day! There’s no easier way to get cash back into your business than by applying for an unsecured business loan with NHFinance. With flexible loan terms and fair interest rates, you can get the cash you need to pay your overheads fast!
Subscription-based businesses or businesses that collect recurring payments often struggle to find ways to collect their payments effectively. One cannot rely on customers making manual payments as they try to skip payments or simply forget to do the EFT. This makes it very hard to manage your cash flow and grow your business as you never know what you’re going to be getting in. It doesn’t have to be this way, however. Businesses accepting recurring payments can sign up for direct debits to automate the process of collecting payments from customers on a set day every month. This eliminates the hassle for the customer and makes your income far more predictable. This solution is perfect for:
With the cost of living in South Africa on the increase, our monthly salary can sometimes barely cover our expenses, never mind during a pandemic where salary cuts and retrenchments are plentiful. From groceries to medical aid, school fees and fuel, expenses add up fast and cash dries up even faster.
If you need cash urgentlyto pay important expenses like electricity, water and rent for example, where do you get it from? Most of us think, I’ll take out a personal loan, so I can get cash today. But the reality is, banks can take weeks or months to get a loan approved. And by then, it’s too late.
And after all that waiting, they could reject your loan applicationbecause you have a bad credit scoreor no credit history at all. You may think there is no hope to get a loan, but we will show you how to get a loan with no credit check!
Loan Against Movable Assets
If you’ve got valuable jewellery, art, vehicles, boats or other loose assets as security for a loan, you can apply and have cash in your hand in less than 24 hours! We offer a loan product that guarantees you a quick cash loanwhen you lodge your valuables with the lender as loan collateral.
The loan term is very flexible and generally clients choose to pay back the loanover 3 to 6 months, but the loan term can be shorter or longer. This is a very quick way to get a loanwith no risk to you. Your valuables are safely stored away and returned to you in the same condition as soon as your loan is paid up. For more information or to apply for a loan against assets, click here.
For more information on personal loans, property loansor business loans, please take a look around our website. We invite you to apply for any of our loan products should you meet each product’s minimum requirements.
Quick answer: To get a business loan in South Africa, first match the type of funding to why and when you need the cash, then prepare your financials and understand what lenders assess: credit record, collateral, time in business and turnover. Many applications fail because the business applied for the wrong product, not because the business is weak.
If banks have turned you down, specialist lenders can look at your business differently. As a broker, New Heights Finance introduces you to those lenders. Approval is decided by the lender and is never guaranteed.
Step 1: Work out what you need the money for
Ask two questions. First, when do you need the cash: right now, or in a few weeks or months? Second, what is it for? A gap while you wait for a big invoice to be paid needs a very different product from seasonal stock, equipment or expansion.
A clean business and owner record makes approval easier. A large debtors book, heavy overheads and unpaid bills make lenders cautious.
Collateral
Equipment, machinery, vehicles or a building can be security the lender can claim if repayments default.
Time in business
Longer trading history and better financial records improve your chances.
Annual turnover
Many lenders set minimum turnover per product, so check before applying.
Step 3: Prepare your documents
Recent bank statements for the business.
Annual financial statements or management accounts.
Company registration documents and IDs of directors.
Details of the asset, invoices or order you are funding against, if any.
Is it hard to get a business loan in South Africa?
Through traditional bank channels it can be, and rejections after long processes are common even for growing businesses. Specialist lenders usually work faster and weigh different things, such as your turnover, invoices or assets. For example, unsecured business loans arranged through our lender network typically look for a business trading for more than six months with meaningful annual turnover. Exact criteria are set by each lender.
Before borrowing, use our business loan calculator to estimate repayments and confirm the cash flow can carry them.
Common mistakes that lead to rejection
Applying for a product that does not match the purpose (for example, a term loan for a short invoice gap).
Applying to many lenders at once, which leaves multiple credit enquiries.
Incomplete or out-of-date financials.
Asking for more than cash flow can comfortably repay.
FAQs
What do I need to qualify for a business loan?
Lenders typically look at credit record, collateral, time in business and annual turnover, plus up-to-date bank statements and financials.
Can I get a business loan without collateral?
Some lenders offer unsecured business loans based on turnover and trading history, subject to their criteria. Secured options are often available on better terms.
How long does business funding take?
It depends on the product and how complete your documents are. Specialist funding is generally quicker than bank processes, but timing is set by the lender.
Is New Heights Finance a lender?
No. We are a finance broker that introduces businesses to specialist lenders and negotiates on their behalf. Approval is decided by the lender.
Are your bond repayments too high? Tenants not paying rent? Vacancies increasing? Sounds like you need to
reduce your monthly bond repayments. It is possible to reduce your bond repayments by up to 32% per month and free up cash to get your business cash flow out of the red.
This is how – Interest Only Bonds
Your bond repayment is made up of two main components: capital and interest. The capital amount is the loan amount you took out with your financial institution.
Interest is calculated as a percentage of a loan (or deposit) balance, paid to the lender periodically for the privilege of using their money (The Balance)
So, if you remove the repayment of the capital amount and only pay interest, then it is possible to reduce your
bond repayments by as much as 32%. The reduction in repayments is dependent on the interest rate you are currently paying your bank. The good news is, the interest rate is at an all-time low as a result of the economic turmoil caused by the coronavirus pandemic. Bad for investors, relief for property owners. Back to interest only bonds. The capital amount can be paid back at the end of the loan term.
Here is an typical example (subject to lenders conditions) that outlines the potential cashflow saving:
Traditional Capital and Interest Repayment Model Bond R 50 million Term 10 years Interest Prime plus 1 % ( 11.25 % ) Repayment R 695 844 pm
Interest Only Model Bond R 50 million Term 5 years ( plus 5 years if account handled well) Interest Prime plus 1 % ( 11.25 % ) Repayment R 468 750 pm
This equates to a 32% improvement in cash flow – R 227 094 pm x 12 = R 2 725 128 pa. Capital Repayment – R 50 million at year 5, or rollover if the lenders is happy to refinance.
Types of properties
The ideal types of properties for this financing solution are income-producing commercial, industrial or
residential properties (blocks of flats, hotels, student accommodation), valued at between R 20 million and
R80 million.
If you have a property valued at more then R 80 mill, it is possible to structure the funding in an alternative
manner. The property must have been owned for at least 2 years and have some equity available.
Risks
As a borrower, your risk is reduced because cashflow is improved. With a positive cash-flow you have
funds to buffer your business against any unforeseen circumstances, such as COVID, other natural or
man-made disasters.
How may I use the cash saved?
The cash you will have freed up can be used for other investments or as the property owner requires. The borrower
must, however, remember that at year three to five, the capital has to be paid back. This can come from
the savings made in cashflow, from bank loans, other businesses or even the Interest Only Bond holder,
could refinance or roll-over the loan.
How long does it take to set up the Interest Only Bond?
The lenders need all supporting documents to prepare a submission. The proposal is submitted to the credit committee for assessment. If all in order, then a valuation of the property is done and the final term sheet is presented to you. This normally takes 2 to 3 weeks, measured from when ALL the requested supporting documents have been received.
What are the costs?
The interest rates charged are market related. Rates from prime plus 1% to prime plus 3% are available. This is risk dependent. The current bond on the property would need to be cancelled and a new bond registered. There may be bond cancellation costs and there will be bond registration costs. There are also the normal administration and raising-fee costs.
Main Advantages Companies wanting to grow their property portfolios can use this finance facility to purchase more property.
If there is equity in the property, it is possible to release this equity.
Cash-flow is improved. Reduction in monthly payments of up to 32 % are possible.
Reduced interest rates. Some property owners are paying rates in excess of prime plus 5 %. There are savings to be made using these commercial bond facilities.
Retirement, Dismissal, Resignation, Death or Divorce are traumatic events in a working persons life, but on the positive side, the lucky ones who have had a company pension or provident savings scheme, are able to make their policy paid up and they can draw down a portion of their funds.
That is the good news. The bad news is that it can take months to get the pension funds from the pension administrators. The reasons for these delays are varied and very frustrating for the individual. In most cases
large corporate companies with call-centres that have very little incentive to process claims fast. This leaves the ex-employee, perhaps only drawing minimum benefit from UIF and now unable to meet their financial obligations.
The Solution
Private pension lenders have recognized this problem and are able to advance pension cash to persons that have given notice to their pension fund, that they require their money to be paid out.
These Pension Bridging companies give pension loans from as little as R3000 up to R50 000 and even more in some circumstances. These funds are made available within 48 Hours of all the paperwork being completed. Yes, you hear right – 48 hours to get your pension payout!
Repayment
Once the provident or pension fund pays out the investment funds, the provident loan or pension loan plus interest and fees is paid back to the lender and the balance is paid to the fund member.
Cost
Provident Bridging loans and Pension Bridging loans, landing rates are governed by the NCA (National Credit Act). Private lending companies are obliged to comply with the NCA or risk having their licences withdrawn. Rates charged for these provident loans are fair considering the risk the lender takes.
Security
Pension bridging does not require any type of security. It is essentially an unsecured personal loan.
Risk
There is no risk to the borrower. There is a cost because the pension lender or provident lender charges interest and an administration fee. The borrower does not have worry about their pension money being stolen. The reason that the risk is low, is that the pension and provident money is paid directly into the members bank account, not to the lender.
Credit Bureau Listing
People often ask if they can get a pension loan if they have a poor credit profile. The good news is,
yes they can. This financial solution is designed to assist those in financial difficulty.
Provident Fund Loans and Pension Loans are a useful way for people that have funds saved to access some of their savings to assist them during difficult financial times.
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