Small businesses use their line of credit for cash flow to run daily operations and pay vendors, suppliers, and business partners. Unfortunately, a business line of credit is hard to come by. Even if a company already has one.
Tag Archives: flexible funding
Of course, you want to grow your B2B small business. That might be tricky to do if you’re like those businesses surveyed in Wasp Barcode’s State of Small Business Report. More than half of the respondents plan to invest fewer than 3 percent of their revenue on marketing. In this case, it should be no surprise why growing revenue is the No. 1 challenge for small businesses.
This is a true story. Names have been changed to protect the innocent and the guilty.
A prospect contacted me interested in my company’s services. We discussed the project and came to agreement on the scope and price.
Before you consider going to a bank for a small business loan or line of credit, you might want to explore another option. A better one because it’s money that already belongs to you. The money you get from the flexible financing is invoice financing, which gives you the cash flow you need to pay expenses and grow your business. It’s also known as factoring and accounts receivables financing.
Accounts receivables are open invoices that haven’t been paid. It’s money a company is owed after delivering the product or service. Clients may take 30, 60, 90, or more days to pay the invoice. Some companies speed this process with flexible financing from a factor. The factor — a third party company — buys your invoices and gives you cash as soon as you submit them.
A colleague told me about a long-time client and friend who passed away. The business went with him. It happens. That’s life. While his business made up about a third of hers, she weathered the loss of income because she had enough cash stashed away to cover her while she looked for new clients.
Another colleague texted me to let me know that her computer had died. Fortunately, she was able to buy a new computer the same day and restore her backed up files to the new computer.
Cash flow makes or breaks a small business. If you don’t have the cash to pay expenses and make payroll, then your business can’t survive. Simply put: no cash, no business. This can and does happen even if you have all the customers you want and talented employees who do their jobs well.
On the TV show “Shark Tank,” business owners typically ask for funding in exchange for equity. When a product catches the eye of Kevin “Mr. Wonderful” O’Leary, he likes to counter with a complicated deal consisting of royalties and fees. Sometimes royalty in perpetuity comes attached to the offer. Smarter entrepreneurs turn him down flat because it takes away money they could reinvest in the business.
Your small business could have all the clients it wants and be profitable. Yet without cash-on-hand, things could fall apart in an instant. Profits don’t guarantee you’ll always have cash to pay employees, purchase supplies and take care of your vendors. The good news is that you can control your finances to ensure cash is always available. It begins with understanding how cash goes in and out of your company.
Are you or your employees growing frustrated with the administrative part of your jobs in chasing down late payments from customers? How much more working capital would your business get if it stopped spending so much time tracking down customers to pay for services rendered or products delivered? What would you do with the cash if you have it sooner?
A company’s executives came across excessive cell phone bills, so they asked their manager to review the bills. Naturally, the first thing most people thought was that some employees may be abusing their cell phones to make personal calls. That wasn’t the case.
After doing a little detective work, the manager figured out that the high phone bills resulted from employees having different usage needs and working in different locations. One employee, a frequent traveler, racked up roaming charges whenever he traveled to another country. The company found a better plan to fit the employee’s usage and cut the bill by more than half.