Asset Finance - keep the blood flowing

By Jeremy Rayment, Director at Menzies Corporate Finance.

It is an ironic feature of recessions that a large number of businesses survive the darkest days of the downturn, but fail just as the economy turns and we see signs of recovery. The reason that the vast majority of businesses fail is because of cashflow problems, not necessarily because they are unprofitable. When the economy emerges from recession and sales start to grow, both debtors and work in progress increase. This sucks up working capital, and if cashflow is not carefully managed, businesses can easily become over-extended. A business can be profitable, but if creditors cannot be paid it will soon cease trading.

Of course, banks have traditionally provided facilities to help businesses manage fluctuations in their cashflow, but this recession is different. It was caused by a banking crisis that itself was triggered by runaway debt. As a result, traditional bank lending is still relatively scarce, and so growing businesses may well have to look elsewhere for funding.

Go to or use the link belowhttp://menzies.co.uk/docs/Asset_Finance_-_Keep_the_Blood_Flowing_Sept10.pdf to read more...