When you win work before the money arrives, the gap between paying staff and getting paid can strain cash flow. Options include an overdraft or line of credit, invoice finance, short-term business loans and equipment finance for vehicles and tools. Lenders look at your trading history, contracts and cash flow forecasts.
You've just won the big contract. Congratulations. Now you need two more people, a van and a lot more materials. The client pays in 60 days. Your staff want paying on Friday.
That gap between spending money and earning it back is where a lot of growing businesses come unstuck.
The jobs market in a nutshell
Australian Bureau of Statistics figures show job vacancies have held fairly steady for two years, moving between 324,000 and 347,000. That's well below the record 473,000 in mid-2022 but still well above the 227,000 recorded just before the pandemic.
In other words the market has tilted a little towards employers. It's far from one-sided. Good people still have options so you need to be ready to move when you find them.
Growth costs money up front
Taking on staff can lift your capacity. Before the extra revenue arrives, you may need to cover:
- wages and super
- recruitment
- training
- equipment and tools
Example
A business wins a contract that needs extra staff and materials from month one. Full payment doesn't arrive until month four. For three months the business is funding the work out of its own pocket.
Which finance options can bridge a cash flow gap?
Working capital finance or another suitable facility may help cover that gap, depending on your business's circumstances. The aim is to take the opportunity without draining your cash reserves (and without putting the rest of the business under strain).
Hot Tip: Sort out your funding before you sign the contract or make the hire. Lenders are far easier to deal with when you're planning ahead than when payroll is due tomorrow.
Plan your growth
Planning to hire or take on bigger contracts? The right funding structure could help you make the most of it. Book a complimentary chat and I can help you work out what might be achievable.
Book a complimentary chatThis information is general in nature and does not take into account your business's objectives, financial situation or needs. All applications are subject to lender assessment and approval.
Frequently asked questions
Invoice finance lets you borrow against unpaid invoices so you receive most of the money before your customer pays. Fees and terms vary by provider.
Yes. Equipment or vehicle finance can spread the cost over several years, with the vehicle as security. This keeps cash available for wages.
Typically financial statements, BAS, tax returns, bank statements and details of the contract or growth plan. Requirements vary by lender and loan size.
