With the titans of the business world struggling to raise cash, it’s no wonder the wells are running dry for small businesses. Fortunately, small businesses have options to traditional bank loans–and they don’t include begging Congress to bailout  main street.

Here’s a look at five ways your business can build cash flows  in today’s tight credit market.

Cash is King

The secret to small business success? Cash, cash, cash. Effective cash flow management has trumped location as the number one determinant of a healthy business. Maintaining a positive cash flow is the key to making the most of your fortunes in the marketplace and growing your business.

The following strategies will help you raise capital in any economy:

Banking on a Loan Alternative

Private bank loans, the traditional source of ready cash, are less accessible and a worse deal than ever before. The credit crunch has left lenders low on funds and more risk-averse than in the past. A Federal Reserve survey of senior loan officers found that seventy-five percent of banks have tightened their lending standards for small business loans. As a result, approval rates are low, the turnaround time for loans is long, and interest rates are less favorable than before. Fortunately, small businesses can take advantage of alternative sources of  business funding.

1. Federal Small Business Administration (SBA) Loans. President Barack Obama’s Small Business Rescue Plan promises to create affordable loans for small businesses. The federal Small Business Administration’s Disaster Loan Program would provide low-interest, long-term loans administered directly through the federal government. With interest rates capped at four percent and repayment terms extending up to thirty years, the SBA offers terms struggling small businesses can live with. What’s more, lending standards for SBA loans are more generous than private bank loans, making capital infusions a reality for more small businesses.

2. Business Cash Advance. Another tactic for raising capital for working capital or business expansion is to forgo the credit market altogether and leverage future profit instead. Business Cash Advance also referred to as Merchant Cash Advance offer businesses a “cash flow” based on their average monthly credit card sales volume. Available through credit card processing companies and third-party providers, buiness cash advances provide immediate access to operating funds between $2,500 and $300,000. In exchange, the merchant agrees to remit a portion of future credit card receivables to the business cash advance companies. The credit card processing companies handle the transaction, automatically deducting a fixed percentage of each month’s credit card revenue. Revenue-based “repayment” allows businesses to manage their cash flows, paying more in flush times and less when resources are tight.

3. Private Equity Investors. If your small business shows promise, you may be able to ride out a tough market by attracting the interest–and cash–of private equity investors. Friends and family, angel investors, and venture capital offer a time-honored solution to cash-flow problems. But first, you’ll have to present your case to best effect. An online presence can help potential investors appreciate the value of your business. Consult professional Website Design companies to produce a site that showcases your sound business plan, past wins, and anticipated success.

Positive Cash Flows through Sound Financial Management

Besides raising cash, business owners can build cash flows by managing finances effectively. Options include:

4. Managing Accounts Payable and Receivable. Generally speaking, a well-managed business collects receivables as quickly as possible and defers payment as long as is feasible. The economic crisis is making sound cash flow management more difficult for small businesses, which are facing delayed payments from cash-strapped customers. To preempt this problem, pursue accounts receivable immediately. Business consultant Casey Gollan recommends following the 7/60 rule: “Ideally, have your money come in within seven days and pay your bills around sixty days.” This strategy offers you the most advantageous cash flow position. Point of Sale (POS) systems can be a valuable resource in keeping tabs on accounts payable and receivable. Today’s POS systems offer account tracking features that help your business

   a. Generate invoices

   b. Track outstanding bills

   c. Stay on top of installment purchases

   d. Send collection and reminder notifications to overdue accounts

Other tactics for accelerating payments include offering discounts for early payment and allowing customers an easily-accessible Web interface for managing their account. Ecommerce solutions facilitate collections through Electronic Funds Transfer (EFT,) online credit card processing, account status tracking, and other accounts payable (AP) services.

5. Lease, Don’t Buy. Equipment leasing can free up valuable resources by distributing the cost of expensive investments over time. By leasing equipment, computers, cars, or tools you need, you can grow your business without impacting cash reserves or tying up credit lines. Office Equipment leasing allows businesses to focus cash flows and credit resources on daily operations and other immediate expenses.

As cash flows diminish, small businesses need busness funding to sustain their existence. Innovaive business funding options and sound cash flow management are the keys to maintaining liquidity in tough economic times. Resources for building your business’ cash flows still exist. Take advantage of these five cash flow positive strategies to shore up your financial position in today’s market.

Tags: Business Cash Advance

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