Why a business loan to improve cash flow is not always the answer

Quite often the first thought business owners have when looking to improve their cash flow is to take out a business loan.

And it’s not a bad one. However, with business loans, the lender requires regular repayments to a set schedule with interest and fees charged on top. The repayment terms and interest rates can vary greatly, depending on the nature of the loan and the lender’s terms, and no business ever knows for how long it might need the loan when it is taken out.

While business loans can be a solution to cash flow problems, they may not always be the best solution. there are a few reasons for this:

  • Applying for a loan requires an investment of time. Loans are a commitment over the medium to long term and you never quite know how much they are going to cost because interest is charged on a daily basis. While it may turn out to be cheaper than you thought (and you may not even need to use all of it) it could end up being much more expensive than you planned.
  • Loans work best when the capital you receive is working hard for your business i.e., it quickly starts earning more than it costs. The reality, however, is often quite different, especially when using it to plug cash flow gaps rather than to invest directly in growth.

Hydr can help businesses without the need to take on new debt/borrowings. Using our proprietary digital platform, businesses can activate the assets already on their balance sheet by accessing the cash tied up in those invoices that have been issued but have yet to be paid. This is done by invoice financing.

To date, invoice finance has not been taken up by all of the businesses that could take advantage of it, and one of the main reasons for this is because many invoice finance providers look and feel like a loan. They can have long application processes, fixed term contracts, monthly fees, daily interest charges and directors’ guarantees. All of these can be quite daunting and pretty complex to navigate.

Hydr is reinventing invoice finance by making it easier at every stage. Our technology gives you the power to access your money tied up in invoices within 24 hours for a fee that is fixed and transparent with absolutely no hidden extras. We pay 100% of the value of your invoices within 24 hours rather than the more standard 70-90% with the balance down the line. We’ve digitised and simplified the application and onboarding process which takes just 15 minutes and doesn’t require you to submit any additional paperwork. Our class-leading integration with Xero means that we give funding decisions in real-time, giving you access to your hard-earned cash almost immediately, with full transparency on what it will cost.

Are you ready to discover invoice financing?

If you’re ready to discover how invoice financing could work for you and how much it would cost through Hydr, check out our pricing calculator and book a demo today.

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