Ways In Protecting Working Capital And Cash Flow

To ensure that your business can become successful, it is essential for business owners to have a good working capital and cash flow. However, there are issues that can affect these factors which can make ruin your business. To avoid these issues, it is important to look for ways on how to protect working capital and cash flow. Below are some of the following.

Keep a close watch on merchandise

One of the easiest ways to protect working capital and cash flow is to keep close watch on merchandise. As a business owner you need to make sure that you can prevent negative cash flow. And, the best way is to watch your merchandise. To do so, business owners need to make sure that they make regularly check their inventory list. In this way, business owners can make better approach in selling these items. This can be achieved by giving clients discounts on these items. As a result, stocked merchandise can be sold which can help improve your cash flow.

Control yourself in buying items

In order to improve business reputation and efficiency, making use of the latest and most effective items and systems is important. However, there are cases when business owners cannot control themselves in buying items. Plus, some retail businesses provide enticing deals which can make purchases more expensive. Not to mention, some business owners purchase items that are not important for their business. Thus, to avoid this, it is important for business owners to focus on purchasing essential items to allow them to better working capital and cash flow which can help them make their business more profitable.

Improve product presentations

To gain better cash flow from your products, it is also ideal for business owners to improve product presentations. This is important since some clients judge products on its presentation. So, the more enticing your product is, the more chances of selling it. Apart from that, make sure that your products can provide the benefits it boasts of to ensure that clients will continue purchasing it.

Work with reliable financial institutions

Finally, in case that you still experience a hard time improving your working capital and cash flow, the last option is to work with financial institutions. These institutions can provide you with a lot of financial options that can match your business needs. In addition, some financial institutions also offer management systems to make financial tasks easier.

By knowing these tips, improving working capital and cash flow for your business can be easier and more efficient.

Source: www.business.hsbc.com.eg/en-gb/capability/working-capital is a website that offers reliable services to improve working capital which can help increase business cash flow.

Opting For An Interest Rate Collar

If you are a borrower who wants to ensure your interest rates are protected, there are several different tools that you can opt for. An interest rate cap, for example, is one of them. It protects borrowers from soaring market rates. On the other hand, if you are the other party who want to protect your interest rates as well by presenting the minimum rate that your borrowers must pay regardless of the lower fall for the market, you should opt for interest rate floor. And when these two are in place, an interest rate collar is best recommended.

An interest rate collar is the simultaneous purchase by the borrower of a cap and sale of a floor. This simultaneous purchase of the cap and the floor is effective for the same duration specified in the contract. In the business side, this is usually done to lower the cost of the premium rate that the borrower must pay while at the same time insure that it won’t get affected by the drastic movement in short term interest rates.

While borrowers enjoy the significant fall in market rates, they also tend to protect themselves against the rising interest rates by buying themselves a cap. To learn more about the interest rate collar, you should first know the following:

- It carries a prepayment risk
- It requires credit approval
- It is secured by the note of the underlying financing
- It entails borrowers to be prepared to shoulder the unwind cost upon an early termination should rates fall.
- It allows borrowers to realize a gain should rates rise
- It follows standardized documentation

borrower has what is called a Zero Cost Collar in the event wherein the premium of the floor is the same as the cost of the cap. It is equivalent to an interest rate swap wherein the simultaneous purchase of a cap and sale of a floor a floating rate loan is converted to a fixed rate one.

While this is not usually done because there aren’t many strikes that are well-supported, this happens from time to time. Most people prefer to use the collar strategy over the corridor simply because they worry over possible rate hikes.  Most of these floor participants are also inclined to sell a floor to reduce their costs than to offer another cap with a raised strike. And so, opting for an interest rate collar seems to be the best choice for most borrowers.

Facts About Accounts Receivable Financing

Whether accounts receivable financing is an old financing strategy, it still works these days. Accounts receivable financing together with factoring and asset based financing are all the same thing. In simple terms, the process follows these steps. A business sells and delivers a product or service to another business. The customer receives an invoice. The business requests funding from the financing entity and a percentage of the invoice (usually 80% to 90%) is transferred to the business by the financing entity. The customer pays the invoice directly to the financing entity. The agreed upon fees are deducted and the remainder is rebated to the business by the financing entity.

How does the customer know to pay the financing entity instead of the business they are receiving goods or services from? The legal term is called "notification". The financing entity informs the customer in writing of the financing agreement and the customer must agree in writing to this arrangement. In general, if the customer refuses to agree in writing to pay the lender instead of the business providing the goods or services, the financing entity will decline to advance funds.

Why? The main security for the financing entity to be repaid is the creditworthiness of the customer paying the invoice. Before funds are advanced to the business there is a second step called "verification". The finance entity verifies with the customer that the goods have been received or the services were performed satisfactorily. There being no dispute, it is reasonable for the financing entity to assume that the invoice will be paid; therefore funds are advanced. This is a general view of how the accounts receivable financing process works.

Non-notification accounts receivable financing is a type of confidential factoring where the customers are not notified of the business' financing arrangement with the financing entity. One typical situation involves a business that sells inexpensive items to thousands of customers; the cost of notification and verification is excessive compared to the risk of non-payment by an individual customer. It simply may not make economic sense for the financing entity to have several employees contacting hundreds of customers for one financing customer's transactions on a daily basis.

To sum it up, "notification" should not be an issue in most situations involving accounts receivable financing while non-notification factoring is another option that is available for businesses concerned. This is with confidentiality that meet minimum credit standards for asset based lending.

Learn more about account receivable financing and how can ithelp your business here.