The PayPal Check-In Festival is a series of practical webinars aimed at supporting small business owners.
Each session shares the stories, expertise, and knowledge of your peers and industry experts around a particular pain point for business owners.
This second video, it’s all about cash! Our experts cover everything from common cash flow problems to your different financing options.
Watch it on-demand now to learn more about:
- What’s keeping small business owners awake at night- hear common and shared problems
- What alternative lending options are out there for start-ups and small businesses today
- Strategies to fine-tune your finances from funding to growth
- How to approach financial wellness for your business and for your employees
The main conclusions
The panel for our financial session included James Cowdale, head of marketing for small businesses &SONS, Ben Ramsden, head of SME for PayPal UK, and Stuart Lawson, the chief commercial officer of Funding Options. The presentation, moderated by our Editor, Tim Adler, was helpful and full of excellent advice.
The main conclusions are summarized here.
What keeps owners of small businesses up at night?
It always comes down to money, James explains. “When faced with a pressing financial issue, it produces a distraction and prevents us from concentrating on being creative. As a result of our knee-jerk reactions, we often make poor judgments. Everything will be simpler if we can resolve our financial concerns.
Stuart said that “supply chain concerns” and various financial problems are the root of the problems Funding Options’ clients are experiencing. “Some clients have raised employment and wage expenditures, while others need to acquire products during Christmas. Additionally, there are well-known problems that small firms always encounter, such as late payments.
Ben discussed how these concerns were reflected in PayPal’s Business of Change Report, which surveyed 1,000 small companies. Most firms said that the last two years had been the most challenging in their history, but around a quarter believe the next year would be even more challenging. And by far and away, the financial flow and present cost of living crises were mentioned as the top problems.
James addresses the difficulties of needing to frontload expenditure for &SONS. The company depends on media spending to increase product sales, yet some paid channels, have very high costs. They’re also “purchasing ahead of the the season, investing money on a product that takes months to arrive” as a fashion company.
Operating expenses are advantageous for the company, but money is still king.
Where can you go for assistance?
Financial administration is a significant hassle for small company owners since they want to concentrate on their operations first and foremost, which is due to how challenging it is to do.
When it comes to finances, one of Stuart’s main suggestions is education. If you’re exploring the alternative finance sector and are searching for financing for the first time, study up on it. Many lenders (and small businesses) have educational materials available. Understanding your alternatives can help you choose the best solution for the problem you’re attempting to solve.
Knowledge of the idea of financial wellbeing
Another important finding in PayPal’s analysis was that company owners are so busy with pressing operational issues that they don’t have time to examine their finances. Ben said, “just a fourth of them even glance at the books.”
Financial health, on the other hand, entails having a structured procedure to monitor cash inflow and outflow and a thorough grasp of your organization and its cash flow.
The study also revealed that organizations that had upgraded their financial and technological capabilities felt better financially and emotionally, making them better equipped to enjoy vacations and another downtime.
“You’ve got to take that initial step, look in the books, set up the systems, and then figure out how to optimize the firm and perhaps identify new cash flow sources,” Ben said.
Investing additional money in the company
If you need to borrow a certain amount, Stuart advises looking into unsecured term financing for the short, medium, or long term. You take out a loan for that amount and repay it over time.
And you have the same, but secured, where the lender will encumber assets, receivables, etc., with security.
However, suppose you have problems with cash flow. In that case, you may choose more alternative options, such as flexible borrowing or revolving credit facilities, where you get a certain amount that you can draw from as needed.
The most crucial thing is to thoroughly consider your requirements and the product that will best meet them.
According to Stuart, merchant cash advances, also known as business cash advances, are also rising. These loans are made based on your card revenues or general income.
“We may classify them as loans depending on income. Your repayments will be calculated as a percentage of your daily or weekly income to be appropriate to the money generated by the company.
You may also look at leasing or HP-type options to buy a specific asset for your company in the asset financing industry. If you have an asset where you have some equity, you may be able to refinance that asset to free up cash if you wish to look at releasing working capital.
Finally, you may get financing against your invoices via invoice financing and discounts.
The growing interest in alternative financing
High street banks turned down roughly 4 billion pounds worth of company loan requests last year, or one-third of all applicants. Additionally, more small firms are becoming informed about other funding possibilities.
The alternative finance industry in the UK is quite developed. The global financial crisis gave birth to just over ten years ago. However, the epidemic has significantly expedited adoption and awareness. According to Stuart, the “banks were swamped with applications” during the lockout, which “sort of drove small companies to turn elsewhere to some of the alternative loan sources.”
&SONS modeled a variety of loan alternatives to determine the best match, according to James, and chose PayPal’s own merchant cash advance since it was easy to apply for and fit the brand’s sales cycle. Because its cash flow concerns were seasonal, for them, “a shorter payback period was preferable, albeit we were paying more every day. We were able to refinance again sooner, which was great.
Five important suggestions to keep in mind
We’ve compiled the finest and most pertinent recommendations from our panelists if you are a small company trying to understand your financing alternatives.
- Keep a close check on your cash flow since making a profit does not guarantee you have money in the bank. Be sure to be ready by keeping an eye out for those pressure areas in advance.
- Be ready for the unexpected, Accept that nothing will go as planned, and incorporate those obstacles into your day.
- Don’t be averse to using digital technologies to assist your procedures; seek guidance from professionals and other company owners.
- Spend some time upfront learning about your company and its inner workings. Be disciplined; this may mean billing on time or pursuing overdue bills; it could also mean being aware of your working capital.
- Learn about credit scores and the many forms of financing.
Register for our next event
There’s still time to sign up for the final webinar in our PayPal Check-In Festival on the 29th of June, themed around maximizing your international trade opportunities.
We know that expanding overseas offers great potential for small businesses. Find out practical tips from our experts Ben Ramsden, Head of SME at PayPal UK, Rachael Twumasi-Corson, Founder & CEO at Afrocenchix, and James Guard, Founder at Digital Juggler.
If you missed our first webinar, catch up on demand here. We look at one of the biggest opportunities for small businesses – selling on and offline.