Neither a borrower nor lender be –
Shakespeare, I do not agree
The title gave it away but I disagree with Shakespeare on this statement at face value, and with the march of Peer-to-Peer lending by the likes of Growth Street, RateSetter and Funding Circle I am not the only one.
You could argue that the lenders on Peer to Peer platforms are not friends and therefore the perils of lending to friends (or SMEs) makes this analogy tenuous, but what I really want to talk about is how being a Borrower can beneficial to your business all you need to a plan and someone to lend you the money. Simples! Or not, as the reality.
For some borrowing money is a bad thing, they made the wrong decision to borrow and are now beholden to the lender. This happens in all the time and has a devastating impact on them and those closest to them.
In the main, however, borrowing is a great way to grow your business quicker or buy the house or car you want. In these examples, there is some semblance of a plan of what we intend to spend the cash on and the benefit we will receive whether that be winning a new contract, making the wage run or purchasing a property.
With these examples, borrowing appears acceptable and as long as the amount borrowed and repayment schedule matches the benefit and associated cash flow there should be no problem.
Ravens Wood Capital (RW Cap) works with a range of companies, in all shapes and sizes but there is one thing we advocate to all: have a plan and keep testing it against actual performance. A strong plan can give you great confidence and control over your business finances.
The growth of online accounting packages such as Xero and Quickbooks, and forecasting tools like Float and Fluidly gives you great access to date, you just need to know how to use it. Some Accountants have embraced the data and are actively advising clients on how to improve cashflow or raise debts to cover shortfalls, however, most are not.
Ill finish with a question; do you think you have enough cash to withstand a late customer payment or to replace a broken machine.
If the answer is Yes, that’s great news and congratulations! Give us a call if you want that assumption testing. If however, you answered No, give RW Cap a call and see if we can help you improve your cashflow.