How Can Contract Financing Benefit Your Business?
There is no doubt about it; UK businesses are currently finding it difficult to cope with the prevailing economic climate.
As Brexit negotiations continue to weaken the pound and drive up prices, consumer spending has plunged to its lowest rate since 2014. So while UK GDP growth may have increased marginally to 0.3% during the last month, companies are struggling to achieve their desired turnovers and margins that are central to future success.
It is also hard to source funding in the current climate, so start-ups and small firms must strive to minimise costs and create an agile business model where possible. Contract financing may help with this, so long as you strive to leverage its unique advantages:
What is Contract Financing and How Can it Help Your Business?
An agile business model should always be free from long-term debt, while it must also be designed to optimise your levels of working capital at any given time. Contract financing can help you to achieve both of these objectives, as it allows you to sell the value of an agreed contract, retainer or license to a third-party investor before repaying this liability when the client settles their own debt.
Let’s say that you have reached a 12-month licensing agreement with a manufacturer in relation to one of your products. The terms of this will usually dictate that you receive your money in regular increments, which can restrict your monthly cash-flow and prevent you from investing in its near-term growth.
Firms such as Market Invoice are ideally-placed to buy these contracts, unlocking up to 80% of the value in all agreements up to £1 million. Service providers of this type also offer a quick, online application process, through which you can upload and verify your contract before receiving the funds within 24 hours.
This instantly frees up the vast majority of capital that is tied up in your contracts and licensing agreements, providing your company with the working capital required to drive expansion. This may prove crucial in the current climate, in which firms are finding their margins squeezed while cash-flow levels continue to dwindle.
The Last Word
In the current climate, it is imperative that business-owners seek out every conceivable advantage if they are to succeed. For those that deal in long-term contracts and licensing agreements, contract financing can enable them to realise the full potential of their business in real-time, while ensuring that they have the requisite working capital to build, grow and offset any declines in turnover.