It doesn’t matter how good your business proposition is, how many customers you have or how much money you are going to make in the future. If you have no money available to spend, you can’t operate and your business will cease to function. Cashflow problems are common in small businesses; companies waiting for payments cannot grow. However, there are methods to overcome this problem:

Small business book keeping

Keeping an accurate and up-to-date note off all your incomings and outgoings is an old-fashioned but reliable way to run a small business. Book keeping isn’t rocket science, it just involves organisation and dedication. You will probably need to get an accountant, although many sole traders don't need to, but you should always keep your own independent records as well.

No business works without the owner having some idea of what the company’s financial state of affairs is like and yours shouldn’t either. Small business book keeping is one of those tasks that no-one enjoys, but it is something you should not avoid. However, if payments are becoming a problem then there are professional solutions available.


Factoring companies do your invoicing for you and will lend your business a percentage of each invoice you create, usually this is for between 75-100% of the invoice. It will then collect the invoice and pay the balance back to you less their fee and the interest on the money borrowed. Setting up a factoring deal can be done far more quickly than most other forms of finance and therefore is the choice way of financing a business for many small businesses.

Invoice discounting

Invoice discounting is different from factoring as you will be collecting your own debts, but the lender will still be advancing money against them. One advantage of this is that the fee charged is usually smaller – although you will be charged a fixed percentage of your turnover. It is usually confidential, so that none of your customers need know that you are borrowing in this way, which appeals to some people.

However, it does mean that you are entirely responsible for collecting your own debts. It is harder to qualify for invoice discounting than it is for factoring. Companies normally need to be profitable, established for at least one year, have audited accounts and an established credit control function.

Lenders will want far more assurances that their debts will be collected if you apply for invoice discounting than if you go down the factoring route.