Populous World: Invoice discounting for capital and labour-intense businesses

small-business invoice-financing fintech finance business

If we look at the face of the business landscape today, we see companies in labour and capital-intensive industries operating in a difficult, digitised environment, whether it be to raise cash flow to stay afloat, keep up with modern digitisation and technology advancements, or pressure from competitors and productivity challenges.

The Financial Times reported a slowdown in productivity growth in the UK, particularly for labour intense sectors including manufacturing, construction and wholesalers. Labour intensive businesses, although can bring positive returns to a firm and be profitably rewarding, also experience higher levels of cash flow sensitivity and are vulnerable to slow productivity performance, compared with a business cycle with less labour intensity, due to their notorious wage obligations.

As labour is one of the most important factors of production, business sectors such as construction and manufacturing companies may choose funding solutions for cash flow breathing room and to allow them to expand. Since these sectors employ a large workforce number, an injection of cash can help to recruit and sustain wage obligations for a significant amount of time.

For labour and capital intensive businesses, cash flow shortages can be caused by major costs resulting from investments in equipment, machinery, or other expensive capital assets. In any business, cash flow is everything and there is often a big gap between the time when you get paid and when the bills are due.
For companies within manufacturing, mining and construction, cash flow dependency is represented largely by obligations and assets such as labour costs, land, buildings, plants, equipment, vehicles, or heavy equipment.

Labour intense businesses often tend to stumble upon cash flow issues because there are so many small to medium operators who, unlike those in other SME sectors, have to make allowances for high wage bills. This can present difficult financial disruptions to a construction business, that need to pay timely employee wages before they are even paid by their customers. Imagine the stress and weight of a wage bill of a construction business, where they place 100+ workers at any given time, on an average pay of £500–1000 a week. In addition to this, factors such as rising labour costs can put a strain on small businesses, potentially impacting their profitability and valuations. To counter balance the rise of labour costs, businesses may choose to increase the price of their goods or services as the best response to higher wage bills, however, on the flip side, a price pump can lead to lower consumer demand.

At Populous World, we recommend our invoice discounting service to any labour or capital intensive business, as we provide a facility that actually grows with your business, but also help fund start-ups, because in the early days, or in a growth phase, cash flow is always a problem as there are constant tax and wage obligations that can really snowball.

Invoice discounting releases money available that would otherwise be tied up in invoices. Cash is a crucial business asset, representing a secure method of short-term borrowing without incurring debt. In addition, invoice discounting alleviates the hassle of chasing unpaid invoices and the risk of bad debt against the business, signifying that this funding method is a smart way to unlock cash and fuel the growth of your company.
As well as funding support with aspects of your business such as labour costs, there are several other reasons for why businesses seek alternative funding, and where Populous World can help, such as:

· Investment opportunities

· Bridge cash flow gaps

· Protect against seasonal downturns

· Expandsion and growth

· Prepare for economic uncertainty

· Adopt new technologies to advance against competitors with Populous World’s business intelligence platform

To speak to one of our funding specialists about freeing up working capital for your business, contact: [email protected]

Lou Chan, Populous World.

Original article was created by: Populous World at medium.com

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency or ICO.

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