• Ian Tovey

Turnover is vanity, profit is sanity, but cash is king.

A saying heard countless times during my long career in commercial banking and finance and one that is particularly apposite as businesses emerge from the turbulent last 12 months or so!


Its probably fair to say that all businesses will have been affected by the impact coronavirus, both positively and negatively and their working capital requirements impacted.


The government support measures implemented in the form of the furlough scheme, grant funding and loan support packages made available through the CBILS and Bounce Back loan schemes, were quickly delivered and a life saver for many businesses.

Its quite possible that even strongest, cash rich business pre covid has had its cash resources depleted during lockdown which in turn impacted on its normal funding of working capital needs.


Similarly, as the country and world begin to open and some economists positively predicting a quick recovery, new opportunities will appear to grow turnover or indeed terms of trade changed e.g., tightening of credit terms and/or need to extend debtor terms of trade to secure or maintain a customer relationship for example.


Planning and anticipating working capital needs is crucial for all businesses particularly when embarking on a period of change.


There are several finance products in the marketplace outside of the long standing and conventional overdraft and commercial mortgages traditionally available to a typical SME business.


Invoice Financing and Factoring is probably the best known and natural alternative home for financing working capital. Briefly this is a facility where funds are advanced against a debtor ledger against a pre-arranged percentage (up to 90%) with the advantage that the availability of finance grows as the business grows.

Specialist lenders in the invoice finance market can in some instances adapt and support all manor of debtor books e.g., if heavy concentrated by one debtor or to fund a one-off contract.


For those business who don’t operate on a business-to-business sales platform i.e., sales to consumers, for example hospitality, it is commonplace for some sales to be routed through card terminals. A Merchant Cash Advance can secure a business loan with repayments structured against a percentage of future card receipts.


Unsecured loans are fast becoming a go-to choice for businesses looking for working capital. They are simple and quick to obtain, and are available to sole traders, partnerships, and limited companies throughout the UK. Unsecured loans are available to all business sectors and can be used for a variety of different business needs including Working capital.


With Asset Finance you are able to spread the cost of purchase over the course of the economic life of the asset probably best illustrated by a recent live example we were involved with at Action Commercial Finance.


At the Budget on 3 March 2021 additional capital allowances were announced by way of a new super-deduction (130%) and 50% first year allowances to encourage capital spend by companies over the next two years.

In simple terms, companies can claim a super-deduction by writing off 130% of qualifying expenditure on new assets from 1 April 2021 for two years.

For example, if a company spends £200,000 on a qualifying capital expenditure project, then the company can claim a deduction of £260,000 against taxable profits. Translating this into actual savings, applying corporation tax charge of 19%, this equates to a corporation tax reduction of £49,400 or an additional £11,400, because of the budget announcement.


We recently arranged a Hire Purchase agreement for a local road maintenance company to acquire a key piece of machinery support their latest capital expenditure plans. This allowed them to undertake tasks they had previously subcontracted out thus improving margins and profitability.


In addition to the corporation tax saving boost, they protected immediate day to day cashflow by structuring the finance agreement over 5 years and by utilising Action Commercial Finance and our extensive whole of market panel of lenders, secured independent advice and the best deal in the market.

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