As a serious business owner, you are well aware of the needs to remain in business. Whether it is pre-sale inventory or hiring more staff, a competitive business must have the resources to sustain before healthy revenues can flow. Often, your expenses increase while revenues appear to flat line and you must consider ways to remain afloat.
A meaningful cash cushion is a best practice, but there are still times when having enough cash on hand becomes difficult. In such situations, taking a temporary cash flow advance for your business might be the right choice.
Every business owner is not receptive to this alternative form of financing expenses. Likewise, temporary cash flow loans might not make sense for every scenario. Borrowing money with shorter terms should balance the speed and convenience with the costs. If you know that meeting customer demands will lead to a high profit, by all means tap into this resource.
Generally, small businesses are left in precarious cash flow positions when a customer decides to delay paying an invoice. But their delay should not deny you the opportunity to remain strong for other customers who do pay on time. Getting a temporary cash flow loan will free up your cash flow to be less dependent on slow payers.
It is not unusual for most businesses to need a loan at some point. The key is to understand whether a temporary loan or long-term financing is best for your needs. One stark difference is the length of time it takes to repay the loans. Typically, a long-term option can hang over your head for years and a temporary cash flow loan is repaid within one year or sooner.
Unlike long-term financing that you may receive from a traditional bank, a cash flow loan advances money that you expect to receive from customers. A percentage of your daily sales count towards the amount temporary cash flow lenders are willing to provide. Just as the term implies, a temporary cash flow advance puts money in your hand right away that would otherwise come three or six months later.
An advance that boosts your cash flow allows you to take care of immediate business needs. Whether you need to expand inventory, hire more employees or buy new office space, getting the funds quickly helps in meeting growth demands. In addition to new business needs, you may also need assistance to meet ongoing expenses.
For example, meeting payroll is one of the ongoing expenses that can suffer if your cash flow dries up. Your business may be on the upswing and gaining new customers. Time and money was invested in hiring and training top staff for your standards. The last thing you need is to lose skilled employees to the competition because you are unable to pay their salaries. Obtaining a temporary cash flow advance is the solution to overcome this concern.
Another way to make good use of a cash flow loan is when you need to pay suppliers for ordered merchandise. You have fulfilled a large customer order, but have yet to receive the payment. Supplier relationships are important to sustaining a good business and delays could prevent future deliveries. With a temporary cash advance, your business continues to run smoothly right past growth spurts.
In the ideal business world, everyone would have several months in savings to meet daily expenses. In reality, however, having that much cash on hand consistently is not possible for most small businesses. Temporary cash flow advances do not come with long-term commitments, which gives you the ability to remain debt-free quickly.
Repayment terms and uses are not the only differences between temporary cash flow advances and traditional business loans. How lenders determine whether to advance money to your business is also different.
Typically, a traditional bank wants to focus on the current cash flow of a business. This assists in determining the likelihood that the business will repay the loan. With a temporary cash flow lender, the focus is the strength of your receivables.
Lenders do not require collateral from business assets such as real estate or company equipment. Rather, you can receive the funds you need based on the income you expect to receive from customers.
The amount you anticipate receiving from a customer increases the likelihood that you will receive the loan. Since the goal is to improve your cash flow status, it would defeat the purpose to expect you to have a high cash flow on hand.
With a tight credit market, some business owners have fewer financing options that work to their advantage. In many cases, temporary cash flow advances for business are the only thing standing between an “open” sign and shuttered doors. Even as credit becomes available, most businesses find that a temporary advance is better than multiple payments with a long-term commitment.
If one of your favorite vendors offer a hot deal on your top-selling product, you want to act quickly. A drawn out bank process could extend beyond the time you have to capitalize on a great deal. Therefore, an advance will improve your business cash flow and ensure you have the products to meet demand.
Be sure to read the fine print and make sure you fully understand the terms with the lender. By making the right choice based on your needs, you can have minimum cash flow problems and take advantage of growth opportunities at the same time.
Temporary cash flow advances are an alternative financing option even if your business qualifies for traditional bank loans. More often than not, these loans help business owners who are experiencing temporary cash flow problems. Waiting weeks or months to solve immediate cash flow problems is never a concern when you connect with the right lender.
Generally, proceeds from these loans are used for anything that is necessary to remain in business. Not only can these funds cover payroll shortfalls, but the money is also useful for operational expenses such as lease payments, avoiding late fees or paying government taxes. Whether you are dealing with slow sales or slow-paying customers, getting an advance for your cash flow is good business sense.
Temporary cash flow advances can be a lifesaver when you are trying to bridge the gap between a slow period and an explosion in sales. In a nutshell, these loans are convenient and easy to obtain.