Help, My Business is Running Low on Cash

One of the more obvious pieces of advice available on the internet about how to solve cash flow problems is to build a cash reserve.  Great advice about how to avoid running out of cash but not so helpful when you are already running low!

Until recently there was a simple solution – take out a Bounce Back Loan.  For larger amounts there were a few more questions to answer but there was still a straightforward solution – take out a CBIL.

Now life is returning to normal so there are the five traditional options:

  • Panic! Run round like a headless chicken looking for cash.
  • Phone the bank manager (who has always backed you in the past) and ask for a loan.
  • Ask HMRC for time to pay.
  • Phone friends and ask for a loan.
  • Stay calm, take the time to accurately assess the situation and take the steps that address the real issue. Find the appropriate funding for the long-term.
  • Obviously running round like a headless chicken is not the answer; it is much harder to find something without the eyes that come with a head!

The bank manager may well look at your account, note that the business should be able to afford to repay a loan and offer some options; HMRC will help if they can, and Friends may trust you enough to help.  These solutions are attractive because they buy time but unfortunately, they tend to be short-term; the business carries on running low on cash.

If the none of the bank manager, HMRC nor friends believe the business can afford to repay the loan the challenge is harder to overcome but it can be done.

There is only one sensible answer to a cash shortage.  Stay calm, analyse the problem, identify the most appropriate solution, and then implement it.

The Solution


Knowing there is time is the key to staying calm.

Unless the business is the subject of a winding-up order, there is time.  The way to find out how much is to prepare a 13-week detailed cash flow forecast.

The more detail and the fewer assumptions the better.  Telephone customers and ask when they will pay; offer incentives to pay early if it helps.  Speak to suppliers; if they know that all suppliers are being treated equally, they may well help by allowing longer to pay for a few months.

Work out what can be done by improving collections and delaying payments.  Communication is painful but vital.

The cash flow forecast will show how much time there is and what needs to be done to stretch it out.


Challenge every ‘fact’ about the business; things that used to be true are not necessarily still true.

If the business is profitable and still running low on cash, then the problem could be:

  • Financing assets over a shorter period than their economic life.
  • Too much cash tied up in stock.
  • Debtors taking too long to pay.
  • Having to pay for purchases too soon in the sales cycle.

Asset Finance, Stock Finance, Invoice Finance and Trade Finance solutions can help overcome each of these.  Clarity helps identify the solution.  Yes, the cost of business will increase but achieving a positive cash flow using the right funding solution will create a strong sustainable business that can focus on what it does best.

If the business is not profitable it may still generate cash if the loss is the result of depreciation of expensive assets.  If the cash generated is not enough to service the debt associated with those assets, it may be that the finance period does not match the economic life of the asset.  A new Asset Finance provider may be able to help.

If the business is loss making it is easy to blame lack of sales.  Honest, challenging analysis may reveal:

  • Over-servicing customers, stock losses and other costs of sale that result in gross margin on each sale being lower than expected.
  • Wasted time – staff doing things they have always done because that is the job; without realising that these things are redundant.
  • Owners taking too large an income than is warranted by the scale of the business.
  • Overheads that are too large for the size of the business.

It may be that the business needs to increase sales, but it may not.

Clarity of purpose will lead to effective change.  If the business cannot fund the change required, funding may be available in the form of a Recover Loan Scheme loan, a secured term loan, a cash flow loan or indeed an equity investment.  The revised business plan that has emerged will demonstrate the affordability and make securing the finance significantly more likely.

Not being able to pay your tax is not a reason for a business running out of cash. Tax in any form is paid either because it has been collected on HMRC’s behalf (VAT) or profit has been earned.  If the business cannot pay HMRC it is because it has already ‘borrowed’ the money to use in the business; a reflection of one of the underlying issues already addressed above.  HMRC will consider extending the loan with Time-to-Pay and other specialist lenders offer funding that gains time if required.


If your business is running out of cash, this article has set out what you need to do.

You could ask an insolvency practitioner to help.  They will help you do the analysis and help you look for refinancing options before they take formal legal steps such as Creditors’ Voluntary Agreements (CVAs) or more drastic measures.

You could ask EgoPetram for help.  We consultants who are experienced businessmen who have turned round businesses that were running low on cash, and we are a commercial finance brokerage who has access to all the funding solutions available from over 200 providers.

Whether the help comes from your own efforts or supported by others the business needs you to stay calm, rigorously analyse the real problem(s) and match the solution to the requirement.

Leave a comment

Your email address will not be published. Required fields are marked *