Business is booming. You are driving in business and money is being made. However, there is a problem. Your cash on hand is low, almost nonexistent. It is difficult to pay employees or buy supplies due to outstanding invoices. The good news is there are plenty ways to solve this problem and increase cash flow in your business. Here are 7 ways to increase your cash flow through loans, credit, and financing!
1. Consider factoring
Factoring is when you sell your accounts receivable to a factoring company for a slight discount and then let them take care of the collection of that invoice. A short example using round numbers: You sell an invoice worth $5,000 for something that has already been shipped or completed and the factoring company gives you $4,500 immediately. They then collect the $5,000 owed on the invoice, forward you $400 and keep the remaining $100 as a fee. Not only do you get money immediately, the factoring company does the collecting.
2. Equipment loans
You can procure loans specifically for equipment or you can get a term loan secured by the equipment you already own. This is a viable option for companies that cannot get a loan from a bank or that may have less than stellar credit.
3. Asset-based loans
You may be able to secure a line of credit with your accounts receivable, your inventory or the equipment you own. In a nutshell, you complete a Borrowing Base Certificate on a monthly basis that shows the value of all your assets. You are then permitted to borrow up to 80 or 90% of your outstanding accounts receivable and maybe more against your inventory and equipment.
4. Cash Advance Assignment Loan
This can refer to either a Merchant Cash Advance, which is paid back by the lender taking a percentage of your company’s credit card sales or a term loan that is paid back through either daily or weekly ACH debits from your checking account. Pay close attention to the fees and rates that lenders offer.
5. Establish a line of credit
Lines of credit are quicker and a lot more convenient than short-term loans. You can shop around to get the best rate and once you’ve found the one you’re happy with, you can use your line of credit to cover emergency purchases and to give you smoother cash flow. When you don’t need it, just keep it paid off.
6. Renegotiate fixed debt
See if you can negotiate a deduction on an interest rate. If that may not work, try extending the term of your loan. This means smaller payments and more cash on hand.
7. Get a high-interest savings account
When your cash flow is low, you aren’t thinking about a high yield savings account. Surprisingly it’ll be worth it, in the long run, to set one up for when you do get smoother cash flow established. Your money in the bank might as well be working for you, right?