Working Capital Finance

The best answer is often two facilities rather than one: a revolving line sized to the ongoing cycle, plus a term facility that clears the accumulated backlog in one move. The revolving line then stays available for the purpose it was built for, instead of being permanently full.

For a lot of businesses, the working capital gap and the tax position are the same problem wearing two hats. GST collected gets used to pay wages, the BAS falls due, and the balance rolls forward. Once general interest charge is compounding on that balance, the arrears grow whether or not trading improves.

• A working capital facility does not fix an arrears balance. It funds the cycle from here on.
• Clearing the arrears is a refinance question, usually secured against property, and it is worth doing at the same time so the new facility is not immediately consumed by the old problem.
• Lenders check the ATO position. An undisclosed balance found in your statements will end a working capital application faster than the balance itself would have.
• If the arrears are large and the business is under real pressure, speak to a registered tax agent about lodgement and to your accountant about whether the business is trading solvently. That conversation should happen alongside the finance one, not instead of it.

1. 01

   Build the thirteen-week cash flow

   Week by week, money in and money out, including wages, rent, BAS, superannuation and existing loan repayments. Thirteen weeks is long enough to show the pattern and short enough to be honest.

2. 02

   Measure the cycle

   Debtor days, stock days, creditor days. This is what sizes the limit, not a number you feel comfortable with.

3. 03

   Separate the backlog from the cycle

   Arrears, overdue supplier accounts and accumulated tax are the backlog. They are cleared once, with a term facility. The cycle is funded continuously, with a revolving one.

4. 04

   Check what security is available

   Property equity changes everything about the pricing and the term. Existing General Security Agreements can block a new invoice or equipment facility, so we map every registration on the PPSR before approaching anyone.

5. 05

   Take it to lenders whose appetite fits

   Overdraft appetite, invoice finance appetite and unsecured appetite live in different institutions. The submission is written for the specific credit policy it is going to.

6. 06

   Set the covenants and the review dates

   Then diarise them. A facility that quietly breaches a covenant is a facility that gets reduced at exactly the wrong moment.

Finance buys time. It does not shorten your debtor days. The businesses that stop needing bigger limits every year are the ones that change the cycle at the same time as they fund it.

• Invoice on completion rather than at month end. Two weeks of float, free.
• Put trading terms in writing and enforce them. Unenforced terms are not terms.
• Take deposits on large orders. This is the cheapest working capital available to any business.
• Negotiate supplier terms deliberately rather than accepting the default.
• Review stock lines that turn slowly. Slow stock is cash sitting on a shelf.
• Lodge on time even when you cannot pay in full. Lodgement and payment are separate obligations, and lenders read the difference.

We can find a way through this. Then we make sure you do not need to find it again next year.

A business carrying four short-term facilities with weekly debits does not have a cash flow problem in the ordinary sense. It has a repayment structure that removes money faster than the business can earn it.

Where there is property equity, refinancing that stack into one secured facility with a monthly repayment over a long term usually reduces the monthly outflow substantially. The calculator on this page is indicative only and is not an offer of credit, a quote or a guarantee of approval, but it will show you the size of the difference between what you are paying now and what a single facility would look like.