Banks should be a last resort for SMEs struggling with cash flow

As banks are accused of ‘throttling’ the UK recovery through lack of lending, leading business coach Dominic Ashley-Timms says struggling small businesses should only turn to banks for help as a last resort.

Instead, they should focus on ‘above the board’ but often overlooked guerrilla cash flow tactics to bring cash in and stop it going out.

Ashley-Timms, managing director of, says small business owners need to develop a cash flow mindset, whether times are good, bad or indifferent.

“SMEs are often so caught up in running their businesses they don’t notice that funds are running low until it’s too late. Then they go into panic mode and take all sorts of knee-jerk actions, like going to the bank before considering other options. Going to the bank in a panic can lead to a downward spiral that might be totally unnecessary.”

Ashley-Timms, points to five key questions that should be top of mind for the small business owner with constrained cash flow:

  • Do I have a viable business?
  • How much cash do I need and for how long?
  • How much cash can I conserve by agreeing new terms with creditors?
  • Where can I find new cash for my business?
  • What structure should my business have for the best chances of success?

“Getting a robust grip on the first two takes time, but they’re essential to successful outcomes from tackling the other three and to demonstrate a credible, confidence-inspiring position to those who can help you to retain and attract cash.”

When credible plans for moving forward are in place, trade creditors, finance companies, even government agencies can be persuaded to reschedule or renegotiate payment terms, which helps keep cash in the business.

Generating, as well as saving, cash should also be a priority.

“There’s cash waiting to be unlocked in your sales ledger or inventory sat in the warehouse. Factoring and invoice discounting can help you to do that. People worry about the cost of raising the cash, but that’s a red herring. The key thing is to ensure a viable business stays that way and get cash into your business as quickly as possible.”

Finally, SMEs may need to restructure their business operationally and financially to make sure problems are permanently fixed.

“It may mean redundancies, short time hours, de-layering and even, in extreme cases, seeking a company voluntary arrangement (a legally binding deal between an insolvent company and its creditors which allows debts to be repaid over an agreed period). That sounds frightening, but if the business is viable in the long term it may be a worthwhile last resort.”

“Applying these tactics can help to keep a viable business afloat during temporary cash flow difficulties. It’s not just about stemming the flow of cash out; it’s about getting your hands quickly on fresh injections of cash and you don’t have to look too hard to find it,” explained Ashley-Timms.