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How the shift from lending to cashflow solutions is helping UK businesses

There has been a significant shift in the way that UK businesses approach financing and cash management. While traditional lending options, such as bank loans, remain popular, there has been an increase in the use of cashflow solutions as a means of obtaining funding and managing financial resources.

One reason for this shift is the changing nature of the UK economy. The economic climate in the UK has become increasingly uncertain, with Brexit and pandemic-related impacts leading to increased economic volatility and uncertainty. In this environment, businesses are more risk-averse and are looking for financing options that are more flexible and adaptable to changing circumstances.

Types of cashflow solutions

Cashflow solutions, such as tax credit financing, invoice finance and supply chain finance, offer businesses a way to access working capital and manage their financial resources without taking on traditional debt. These solutions are based on the value of a business’s assets, such as tax credits, invoices or inventory, rather than its creditworthiness, making them more accessible to businesses that may not qualify for traditional lending.

Another reason for the shift towards cashflow solutions is the changing needs of businesses. In the current economic climate, many businesses are struggling to maintain consistent cash flow and are looking for ways to manage their finances more effectively.

Avoiding long term debt

Cashflow solutions can help businesses to improve their cash flow by providing access to funding based on their current assets, rather than their past financial performance. This can be particularly useful for businesses that are experiencing temporary cash flow issues, as it allows them to access the funds they need without taking on long-term debt.

In addition to providing a source of funding and helping businesses to manage their finances more effectively, cashflow solutions can also offer a number of other benefits. For example, invoice finance allows businesses to release the funds tied up in their outstanding invoices, allowing them to make necessary purchases or investments that they may have otherwise been unable to afford.

Supply chain finance

Supply chain finance, on the other hand, helps businesses to manage their relationships with suppliers by providing a means of financing purchases and reducing the risk of payment default, similar to what we see in the consumer space with Buy Now Pay Later (BNPL).

Is a cashflow solution right for your business?

It’s worth noting that while cashflow solutions can be a useful tool for businesses, they may not be suitable for all companies. For example, businesses that are already experiencing financial difficulties or have a poor credit history may not be able to access these types of financing. It’s important for businesses to carefully consider their options and choose the financing solution that best meets their needs.

Despite these potential drawbacks, the shift towards cash flow solutions is likely to continue as businesses seek out more flexible and adaptable financing options. This shift may also be driven by technological advancements, as the proliferation of online lending platforms and other financial technologies makes it easier for businesses to access a wider range of financing options.

Overall, the shift towards cashflow solutions is driven by the changing needs of businesses and the uncertain economic climate. These solutions offer a flexible and adaptable way for businesses to access funding and manage their financial resources, helping them to navigate the challenges of operating in an increasingly volatile and unpredictable environment.

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