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 route it to a specialist partner we have vetted. This page is information rather than advice.
