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Cash flow is the money that comes in and goes out of your business. Typically small business owners are laser-focused on cash flow because it is what allows them to operate the business. Having smooth, steady cash flow allows small business operators to meet their financial obligations, plan for growth and expansion, and weather the storms that will come. However, not all small businesses have the luxury of simply flipping the cash-flow switch. There are many reasons why small businesses struggle with cash flow. In this article, we offer several tactics on how to use small business financing to create smooth business cash flow.

The importance of cash flow to a small business

All small business operators need to maintain a clear picture of their cash flow. Cash flow allows a small business owner to operate the business by meeting its financial obligations. For example, employee salaries, rent, operating expenses, taxes, accounts payable, insurance, utilities, marketing, and costs associated with fulfilling orders are some expenses needed to operate a business.

Even when revenue comes in the door from a sale, cash flow is needed to fulfill the order. Even a small business with excellent profit margins on that revenue still needs cash flow to fulfill the order. Depending on the business, the cash received from a sale might not hit a business’s bank account for several weeks up to a month (or longer); the accounts receivable process is not always fast. While revenue and profit are important to track and improve upon, understanding daily cash flow is still one of the most important things to keep a small business running.

Key cash flow metrics should be maintained and reviewed on a small business’s cash flow statement. The financial data on this document is critical to understanding how cash comes in and leaves a business. Reviewing the cash flow statement, maintaining quality data with bookkeeping efforts, reviewing information from accounting software, etc, are all business operations best practices that will lead to positive cash flow; and avoid negative cash flow. This data will also help your business create a cash flow forecast, which will come in handy if you have to write a business plan for a loan application.

In addition to operating the small business daily, strong cash flow can be beneficial in these areas:

  1. Anticipated growth and expansion: growth and expansion efforts can be supported with strong cash flow. If a small business is in a position to expand, it likely knows the steps needed to do so and the amount of cash flow required. Having a clear picture of cash flow will let a small business know when the time to expand is right.
  2. Unforeseen opportunity: not all growth and expansion efforts are carefully planned and timed. Unforeseen opportunities can arise that require you move quickly to take advantage of them. For example, you receive information that a competitor is struggling and might be open to an acquisition, or desirable real estate comes on the market, and it will go quickly so you need to move fast, etc. Having strong cash flow allows you to be prepared for the unknown opportunities around the corner.
  3. Unforeseen challenge: Just like there are opportunities around the corner, there are also challenges. Many times unforeseen, small business owners need to be prepared for any challenge that presents itself. Cash flow can make a small business more resilient to challenges like recessions, pandemics, inflation, market shocks, or other force majeure events.

Cash flow is very important to operate a healthy small business. However, establishing, maintaining, and improving cash flow is easier said than done as many small businesses struggle with cash flow. Luckily for small business owners, there are tactics to improve and smooth out cash flow by using financing. 

How small businesses can increase their cash flow with financing

In a perfect world for small business owners, cash flow is not a problem, revenues go up, profitability goes up, and your business goals are achieved just like that. The reality is operating a small business can be very challenging and many have cash flow problems. In the list below, we present a range of financing options small businesses can use to increase their cash flow. It is ultimately up to the business operator to determine which tactic is a good fit for their specific situation:

The available range of small business financing opportunities can put a small business in better control and increase positive cash flow. There are so many ways to use small business financing to increase cash flow. Whether it’s a small business credit card to manage when you pay for a cup of coffee or a large, multi-million-dollar loan to grow and expand, small business financing can dramatically increase cash flow.

When you are considering the above list of small business financing options to increase cash flow, also think about how you might use multiple options simultaneously. For example, opening a business line of credit doesn’t mean you have to use it immediately, but it’s good to have and can complement other financing.

How to find small business financing

Factoring in all of these small business financing options can be a challenge but they can lead to better cash flow management and an increase in cash flow. There are many lender options to get a business loan, a credit card, and a line of credit for your small business. Biz2Credit is a great place to start. Our helpful staff provides small business owners with exceptional customer service and will work hard to understand the needs of your small business, the intended uses for your loan, and the best terms that can be offered. Get in touch today to find out the small business loan financing that can help you.

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