Strong and steady cash flow is imperative for any business to thrive. However, many companies experience seasonal income fluctuations that imperil their stability. Effective cash flow management is the key to dealing with these difficulties. Here are some methods of financing that can help you handle cash flow crises.
Take Out a Short Term Loan
Short term loans can see you through slow seasons and also enable you to take advantage of sudden opportunities that arise. These loans involve small amounts, short repayment periods, frequent payments, and fairly high-interest rates. However, they can effectively get you through cash flow gaps.
Obtain a Line of Credit
The advantage of lines of credit is that they are standing by and available, but you only have to draw on them when you need them. The time to apply for a line of credit is when your business is doing well so that when you have an emergency, cash flow difficulty, or chance to grow your business, the financing is already approved.
Use Business Credit Cards
You can use business credit cards to bolster your cash flow when you need to purchase equipment, handle emergencies, or get through slow seasons. Credit cards have the added advantage of offering you various rewards such as cash back or travel miles. However, interest rates and fees can add up, and there’s always a temptation to overspend.
Implement Invoice Financing
If cash flow difficulties are caused by slow-paying clients, invoice financing can help. This allows you to access a revolving line of credit based upon your unpaid invoices. It’s slightly different from invoice factoring, in which you sell your unpaid invoices to factoring companies. With invoice financing, you continue to directly communicate with your clients instead of turning over this responsibility to the lending company.
Get a Cash Advance
If you quickly need emergency funds, you can obtain a cash advance. However, their high-interest rates make cash advances significantly more expensive than traditional loans. Be sure you understand all the terms before you avail yourself of this financial product.
For more advice on strategies to improve cash flow, contact Prime Wealth Development.