Debt Factoring Could Help Business Survival in the Recession

by Phillip Evans

Its now a blatant fact that the British Economy is in a downturn and Company Directors interested in their Companies existence must have a plan or they will most certainly go into liquidation

Tough trading over Christmas and the New Year period has seen an unprecedented number of high street retails go into administration or liquidation.

Retailers and Businesses that have already been bore the brunt of the recession and have had to go bankrupt are MFI the furniture retailer, Whittard of Chelsea, the specialist tea and coffee retailer. and Savvi the music retailer formerly Virgin Megastore.

One of the most well know victims of the recession is Woolworths that went into administration just before Christmas. Its final shops closed on January the 5th, resulting in 27,000 staff loosing their jobs.

How can a business survive this recession? Well Alan Tilley of the Turnaround Management Association says that for a business to achieve a successful turnaround it needs four things; a viable business core, credible management team, a valid business plan and appropriate finance.

The credit crunch and lack of liquidity within the financial money markets has restricted traditional forms of lending from Banks into Businesses to very dangerous levels. This limitation of funding has implemented a Cash Flow Squeeze on British Business.

Company Directors with an eye on survival should immediately have a plan to reduce expenditure within the business. Carefully review expenditure to identify any areas of your business where savings can be made. Meticulously going over the Companies expense to find areas where costs can be cut. You should look at Telephone Charges and Tariffs, Utilities, Trade Suppliers, transport costs. The build up of a number of cost saving can be remarkable.

Cash is King and Company Directors looking to avoid the pain caused by an economic downturn should seek out alternative sources of funding such as debt factoring, which is increasingly popular for small to medium businesses. While not suitable for all businesses, the huge benefit of debt factoring is that rather than have money tied up in invoices that are yet to be paid, you can receive an initial payment up front, typically 80% - 85% of the gross value, and the remainder when the customer pays the invoices to an invoice finance provider, less the service fee which has been negotiated with them. However, if the customer defaults on payment, then the factoring company will recover the money provided to you initially from any further invoices which are factored. This can lead to unpredictable working capital if customers are poor payers or they go into insolvency. - 20490

(http://www.enablefinance.com/business-finance/invoice-factoring/) Invoice Factoring is provided by the Asset Based Lending team of Enable Finance Ltd. Enable Finance are specialist corporate finance brokers providing UK business access to traditional and different types of credit. For a free consultation please contact the (http://www.enablefinance.com/business-finance/) Business Refinance Team.