If you run your own business, you probably need very little convincing of the importance of cash flow. Cash flow is what keeps a business agile and allows it to capitalize on opportunities that can facilitate growth for the business and prosperity for the entrepreneurs at the helm. Think of every time you’ve managed to snap up a piece of equipment at a bargain price. What would your productivity be like if you didn’t have that equipment? What about that time you moved to a swanky new premises with better facilities and foot traffic. Just think how much it would have impeded your growth if you’d stayed where you were.
Of course, maintaining a healthy cash flow is easier said than done and there are many reasons why capable entrepreneurs find themselves in the throes of a cash flow catastrophe. All it takes is an unexpectedly high tax bill, a habitually late-paying debtor or an unexpected employee absence can all prove a potential impediment to your cash flow.
For years many entrepreneurs reached out to banks for a loan to ease their cash flow but this is becoming increasingly problematic…
Why banks are saying no to entrepreneurs
Banks are still recovering from the financial crisis 10 years ago, in which reckless lending created an unsustainable bubble that collapsed and resulted in many countries bailing out their banks with taxpayers’ money. Needless to say, it’s not a phenomenon they’re keen to repeat. Hence, banks are far more gun shy when it comes to lending, even lending to established businesses.
But don’t despair! Just because the banks reject you this doesn’t mean that you don’t have options…
Alternative lenders
Banks are no longer the only game in town and the rise of digital lenders allows businesses to pursue alternative lines of credit after being rejected by banks. These lenders, such as businesslineof.credit can be a handy lifeline when more traditional lenders fail you. Their lending criteria is looser than that of a bank and, because they have far fewer overheads than their brick and mortar counterparts, their interest rates are often pretty favorable too. In most cases you will need to have been in business for over 6 months and have an annual turnover of around $50,000.
Business credit cards
If your cash flow needs are relatively small, credit cards can give you the liquidity you need to stay agile. While you may not be extended the same amount of credit or interest rate of a loan, business credit cards can be very handy so long as you factor the interest rates into your monthly costings.
Plus, if you pay your debts in full you can usually expect a period of interest free credit.
Overdrafts
Hopefully, if your bank is reticent about the prospect of loaning you money, they may be more enthusiastic about allowing you an overdraft on your business account. While it may amount to little compared to a short term bridging loan or even a credit card, it can ease your cash flow and enable you to to carry on operating optimally while you chase your debtors and keep on top of your tax affairs.
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