New Strategies May Be Needed To Manage Business Cash Flows


Volatility may mean garden centre businesses will need to think differently about managing their cashflow in the future.

Simon Quinton Smith of Quinton Edwards believes that garden centres are having to operate in very different conditions than they were 10 years ago.

• Our climate seems to becoming more volatile and economic conditions may start to change so garden centres whose profits can come in on a seasonal basis could be facing a greater risk of hitting the financial markets at sub-optimal times.

• While better market ‘highs’ could well balance out profits in the longer term, some businesses may end up waiting two or three business cycles to see returns come through.

• Many garden centres could end up funding increasing amounts of their working capital through 12-month annual overdrafts, which simply can’t provide the longer term certainty and financial ‘buffer’ needed. Instead, shorter term cash flow needs would be better covered via a flexible loan spanning several years rather than an annual overdraft, which could find markets largely unrecovered in a 12-month period.

Simon Eales from specialist agricultural lender, the Agricultural Mortgage Corporation (AMC), says another measure to ease cashflow pressure could be to take out longer term or interest-only loans.

He says: “We find our clients can be inclined to pay off term loan borrowing as quickly as possible. But at current interest rates, taking a longer term loan with lower monthly charges could be a very practical step to take to reduce the cash flow cost. Equally, a number of lenders offer interest-only loans where you pay back the capital when funds allow.

“Borrowing £250,000 over 30 years rather than 20, or even borrowing on an interest-only basis would keep monthly repayments low – especially with the rates you can fix now. In difficult times, like now, this means you are putting your business cashflow – and yourself – under less pressure. In more profitable years, it means you can free up cash to invest elsewhere or pay off more of the loan capital.”

He says the example of £250,000 borrowed at a notional 4.5% interest rate on a 20-year annuity would mean a representative monthly repayment of £1,582. As a 30-year annuity it would represent a repayment of £1,267 per month; and on an interest-only basis, £938 per month.

For confidential advice or further information please contact Simon Quinton Smith on 01635 551441.