Posted on 4 March, 2019  |  4 mins

Conrad Ford | CEO of Funding Options | 9 Spokes blogAlternative finance options exist for retailers and other small businesses to iron out any cash flow wrinkles they might be experiencing. But what options are we talking about? Conrad Ford, founder and CEO of Funding Options, explains, and goes through some of the more popular choices available.


Healthy cash flow is vital for every business, and the retail industry is no exception. With external market forces it can even be more difficult for retailers to predict or control cash flow.  

Fluctuation in sales, seasonal high demand or unexpected bills could all be the causes of cash flow constraint. Fortunately, there’s software that helps retailers keep track of their income and outgoings to forecast cash flow. But even if you can predict a cash flow gap, how can you use that information to maintain steady cash levels?     

You’ll need to make sure that you have enough money available to cover all outgoing expenses. Even if your business is profitable, it can be helpful to prepare for potential unforeseen financial pressure. 

Understanding your firm’s cash flow 

There are certain measures retail businesses can take to improve cash flow. A crucial part of it is understanding your company’s income and outgoings, while credit control is another. These are operational things you can set up that are within your power.  

But what about the external factors that may be out of your control? There’s a variety of alternative business finance out there specifically suitable for those critical situations retailers may find themselves in from time to time. Talking to them and understanding the struggles they’re facing has helped us identify a few business finance options that can be suitable.  

Here’s an introduction to the alternative finance that can help improve cash flow in a retail business. 

Unsecured business loans for growth 

Maintaining steady cash flow means that your retail business is able to grow without squeezing its working capital. Sometimes, a larger injection of money is needed to fulfill a new order or start a big project. An unsecured business loan can help you realise your business growth plans without spending your working capital. 

Unsecured business loans don’t require any security—hence the name. This means you won’t need any assets to secure the funds. However, most lenders will usually want you to give a personal guarantee, so they have some reassurance that you can pay if something goes wrong. 

How much you’ll be able to borrow largely depends on your financials such as annual turnover and your overall trading history. An unsecured business loan can enable you to hire more staff, move into larger premises, open a second store or buy more stock. 

Revolving credit facilities for your supply chain 

Unexpected bills and other unpredictable expenses can have a large impact on your cash flow. For those cases it can be helpful to have a safety net to cover those costs.  

Revolving credit facilities are designed to help you cover ‘emergency expenses’ when funds are needed quickly. Similar to a business overdraft, you’ll have a pre-approved credit limit which you can dip into as and when needed. 

Some retailers rely heavily on their supply chain, so they’ll need to ensure that enough capital is available to buy stock when needed. Retail businesses that depend on seasonal demand may also benefit from a revolving credit facility. 

Bear in mind that this flexibility may come at a price, because interest rates are usually higher. However, given that they’re designed to be used for a few weeks at a time, rather than a year or more, revolving credit facilities can be cheaper than fixed loans in real terms—it all depends on how you use them. Either way, it’s important to remember that revolving credit facilities are more of a short-term solution. 

This type of finance is convenient for its ‘rolling agreement’: you won’t have to apply for a new credit limit every time you need funds. Once you’ve paid back a little bit, you can normally draw down more, and you only pay interest on what you actually use.

Equipment leasing for EPOS systems 

Perhaps you’ll need a new piece of equipment that could be key to success and growth. Staying up-to-date with your equipment also means you can work more efficiently.  

Let’s say you’d like to get a new EPOS system for your shop, but you don’t have enough working capital to buy it outright. In this case equipment leasing could be a good solution. Fundamentally, leasing is a long-term rental for a pre-agreed time that allows you to use new equipment for a monthly fee.  

Once the contract is up, you’ll need to return the equipment, so you’ll never legally own the asset. However, you can start a new lease and update to a newer EPOS system. Another benefit is that you can offset the monthly fee against your profits, which may reduce your tax bill (depending on your specific situation). 

Invoice finance for more working capital 

If you offer your customers payment terms via invoice, there may be another option to boost your cash flow. Invoice finance unlocks cash from unpaid invoices.  

The lender takes the burden of the debt for you, which means you’ll get an advance of normally around 85% of the value of the invoices. As soon as the invoices have been settled by your customers, the lender will forward you the rest of the cash minus their fees. This way you can easily balance out cash flow bumps. 

Merchant cash advance for retailers with card machines 

Can your customers pay by card? If so, merchant cash advances may be a good funding option for your business, especially if you’re not eligible for a standard unsecured loan yet. 

The lending is based on future card revenue and will then be repaid as a percentage of each card transaction. This means the lender will get in touch with your card machine provider, so you won’t have to worry about missing repayments. Instead of monthly repayments, the lender will usually take around 20% of your card revenue straight away. 

Consequently, this means the amount you repay goes up and down depending on how well your sales are going—it’s like a finish line you’ll need to reach over time. Merchant cash advances are a convenient option for when your revenue is unpredictable because of seasonal challenges, for example. Instead of interest running constantly, the total cost of the funds will be agreed upfront.   

Final thoughts 

Alternative business finance can help you prepare for tricky situations or give your cash flow a little boost when you’re stuck in a rut. Whether you want to prepare for financial pressure, are trying to grow or fighting for survival—using finance to help you realise your plans can be a useful tool. After all, these are all valid, normal parts of running a business.  

Essentially, it’s important to identify potential cash flow issues early on. This way you can prevent cash flow gaps even before they emerge. If you’re not sure what option would be the most suitable one for your situation, our Business Finance Specialists are on hand to find you the right funding. 


Conrad Ford is founder and CEO of Funding Options, the online marketplace for businesses finance that helps businesses find the right funding for their situation—whether they want to grow, fighting for survival or simply need to pay a tax bill. You can follow them on Twitter @FundingOptions.

How alternative finance can help retailers tackle cash flow issues | 9 Spokes 

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