Insight

Cashflow is king

It’s an age-old saying, but it is true – if a business has no cash, it can’t pay its employees, it has no money to pay bills, it can’t function. The business is effectively dead. And yet, the innovation and ideas that drove the founders to start and develop their tech remains as valid on the day the business went bust as on the day they started.

The same cashflow rules apply if a product is in continuous development and an established SME is developing the next generation of product – cash is king.

So, it has been interesting for me to see some specialist finance houses innovate in the world of R&D tax credits and grants. These finance houses bridge grants from Innovate UK and government R&D tax credits up to nine months in advance. This means that if the business needs to access funding now to improve the cashflow, it can.

The cashflow can be used for all manner of things, including to fund new hires, to bring forward the marketing strategy, and to give the business the funds it needs now to look for equity – empowering the company to stay ahead of the competition (and there is always competition).

Unlike most bridging, this sort of lending is largely unsecured. In any case, most business do not have assets that they can secure, rather the lending depends on the quality of the R&D report, grant award and excellent governance within the business. Let’s be honest, these are things that you should be doing anyway.

One important point to remember is that it doesn’t matter if the business is loss making or pre-revenue. The finance houses are still interested.

It’s not for everyone, I might add – and there is always a cost. But innovators and founders need to know that this new cashflow concept is out there. It might just help!