Diagnosis, before product
The business is viable. The facility is the wrong shape.
A profitable business that keeps running short of cash usually does not have a lending problem. It has a matching problem: the facility it holds was sized and structured for a cash cycle it no longer runs. This page is about diagnosing that before shopping for a product, because the same shortfall points at completely different facilities depending on where in the cycle the cash is trapped.
Recognition
Profitable, growing, and still short of cash
The businesses that end up here are rarely in trouble. They are trading, winning work and making margin, and yet the bank balance keeps tightening. The instinct is to ask who will lend more. The more useful question is why a business that is making money keeps running out of it, because the answer usually sits in the gap between when cash goes out and when it comes back, not in the profit and loss.
Why it happens
Facilities are sized once, then the business changes
Most facilities are put in place at a moment in time and then quietly left. The overdraft was set when the business was smaller. The invoice finance line was arranged when the customer base looked different. The loan was structured for an asset purchase, not for a working capital cycle that has since stretched.
Nothing has gone wrong. The business has simply moved and the facility has not moved with it, and that mismatch shows up as a cash problem rather than as a finance problem.
The diagnosis
Find where the cash is actually trapped
Established businesses tend to have one of a small number of mismatches, and each points at a different resolution. Reading the cycle stage by stage is what separates them.
The cash conversion cycle, stage by stage
- Tender. Cost is being incurred to win work that may not land. Nothing is fundable against a bid, so this stage is funded from reserves or not at all.
- Award. The work is committed but nothing has been delivered or invoiced. The obligation is real and the asset is not yet there.
- Mobilisation. Deposits to suppliers, staff, materials and equipment go out before anything comes back. This is where a great many otherwise healthy businesses run short, and it is the stage an overdraft is worst at covering, because the requirement is lumpy and known rather than a fluctuation.
- Work in progress. Value has been created but not yet billed. Uninvoiced WIP is invisible to most receivables facilities, which is why professional practices and contractors so often find the ledger does not reflect what they are owed.
- Invoice raised. The first point at which a receivables facility can usually do anything, and the reason the gap before it feels so acute.
- Due. Payment terms are running. Cash is committed but not available.
- Paid, late, or retained. Three very different endings. Late payment stretches the cycle; retention holds a slice back for months or years after the work is finished and is not the same problem as slow payment at all.
Find the stage where your own cash gets stuck. The stage, not the amount, is what determines which facility fits.
Resolution paths
What the stage tells you
- Stuck at mobilisation, before anything is invoiced. A receivables facility cannot reach it. A credit line or an asset-based facility that lends against stock and assets usually can.
- Sitting in unbilled work in progress. That is a WIP problem rather than a ledger one.
- Trapped after invoicing. The ledger is the asset, and invoice finance is the direct answer.
- Blocked by an existing lender's security. The constraint is the debenture and consent position, not appetite.
- Ending in retention rather than payment. See retentions and certification, which behaves differently from ordinary late payment.
What we do
Diagnosis first, introduction second
Established Finance is an introducer, not a lender. The value here is the diagnosis: naming the stage where the cash is stuck, then introducing the facility that actually reaches it. Where a case needs more specialist handling, we may introduce you to a specialist provider. This page is information rather than advice.
Talk it through
Need another perspective?
You may already know which facility you think fits. The more valuable question is whether it's actually the right structure for what's happening in the business. We'll review the situation before suggesting possible routes. It costs nothing to have that conversation.
Thank you. It's with our team now.
A person reads every enquiry and we'll come back to you with what we think the right next step is. No obligation at any point.
What happens next
- A person on our team reads it. No need to know which facility you want first.
- If we can help, we may introduce you to a provider and tell you who they are.
- No charge and no obligation at any point. You decide whether to go further.
Adam Parker
Founder of Muswell Rose Consulting Ltd, which trades as Established Finance · former Managing Director of Penny, an invoice finance business, working in mortgages, commercial finance and fintech lending since 2010 (career history).
Last reviewed:
Practical questions
Before you get in touch
How long does it take?
It varies by facility, so there isn't one number that fits every case. Some drawdowns against an existing facility complete within a day or two; arranging something new from scratch usually takes longer. We'll give you a realistic timeline once we understand your situation.
What information do I need?
To start, just a description of what’s actually happening in the business. If it progresses, the provider will ask for the usual things: recent accounts, a sense of turnover and trading history, and details of the specific need.