Why Growing Businesses Need Better Cash Flow and Trade Finance Strategy

Many growing businesses do not run into trouble because sales are weak. They run into pressure because growth consumes cash.

This is especially common for importers, wholesalers, distributors, construction suppliers and businesses that need to pay suppliers before receiving payment from customers.

A business can be profitable on paper but still experience cash-flow pressure if the timing of payments is not managed properly.

Why growth creates cash-flow pressure

• Suppliers may require upfront or early payment
• Customers may pay later
• Stock may sit before converting into sales
• GST, wages and operating costs continue
• Management accounts may not reflect cash timing properly
• Directors may inject personal funds to cover working capital gaps

What trade finance can assist with

• Import finance
• Trade finance
• Letters of credit
• Supplier payment facilities
• Working capital facilities
• Debtor finance
• Invoice finance
• Revolving business facilities

What lenders usually assess

• Financial statements
• Management accounts
• BAS
• Business bank statements
• Debtor and creditor ageing
• Supplier and customer contracts
• Stock levels and sales pipeline
• Cash-flow forecasts
• Director background and business experience
• Existing debt and security position

Why financial presentation matters

• A common issue is that business financials may be prepared on an accrual basis, while the lending problem is a cash-flow timing issue.
• The application may need accountant-prepared financial information, cash-flow explanation, management accounts, BAS, bank statement evidence, forecast facility usage and explanation of supplier/customer payment timing.

How Bridle Partners helps

• Understanding the cash-flow cycle
• Identifying the actual funding gap
• Reviewing financials and supporting documents
• Working with accountants where required
• Considering suitable trade finance and working capital options
• Presenting the application clearly to the lender

FAQs

Q: Is trade finance only for importers? A: No. Trade finance is commonly used by importers, but working capital and cash-flow facilities may also support other businesses with supplier and customer timing gaps.

Q: Can a profitable business still have cash-flow problems? A: Yes. Profit and cash flow are different. A business can be profitable but still experience pressure if customers pay later than suppliers need to be paid.

Q: Do lenders require security for trade finance? A: It depends on the lender, facility type, amount and borrower profile. Some facilities may be unsecured, while others may require stock, property, guarantees or other security.

Q: Should I apply for the smallest facility possible? A: Not always. A facility that is too small may not solve the problem. The required limit should be assessed against the business's actual cash-flow cycle and growth plans.