As we have discussed in a previous blog post (Cash Flow is King: The Difference Between Profit and Cash Flow), the state of your cash flow can make or break a business, and the distinction between cash flow and profit is an important one.
What is cash flow?
Cash flow is the money that is paid in and out of the business. When you have regular outgoings to pay for such as bills and rent, you need to have regular money coming in so that you can afford to pay for everything when you need to. You might be making a profit, but if this profit is sporadic it might not last long enough or come in time for you to pay for all of your outgoings – especially the unexpected ones. This is how many businesses fail – not because they aren’t making a profit, but because of poor cash flow.
How can asset finance help preserve your cash flow?
With that in mind, it’s easy to see how paying out large upfront costs can cause problems for your cash flow. Expensive equipment, such as machinery or vehicles, eats up a large amount of your cash all at once, and your income might not be quite enough to stretch to this costly outgoing as well as all of the other things you regularly pay for. When your cash reserves take a hit like this, you need to be sure you still have a substantial cushion to accommodate your continuing costs.
As an alternative to buying equipment outright, asset finance can help you to spread the cost of your equipment so that you are paying it off in smaller, regular chunks. This is true whether the asset finance product you choose is a hire purchase, rental, lease, loan, or mortgage. When you take out a product such as a hire purchase or lease from Arkle Finance, your repayments will be fixed and the interest rate is unlikely to increase during the term of your agreement. This enables you to better predict your monthly outgoings and manage your cash flow. Not only does this give you peace of mind, but it means you can make better financial decisions about your business and preserve its future.
If you would like to find out more about how asset finance can help you to keep your cash flow healthy and grow your business, get in touch with Arkle Finance. Contact us online using the form on the right, or call 01933 304 899.