Working Capital: What’s the best way to cash flow your business?

Jun 28, 2016

What’s best way to cash flow your business? Is there any easy way to capitalize your business?

  • Do you borrow?
    • KEEP IN MIND: Payback can be a bitch …
  • Do you give up equity?
    • What’s the real cost and is there interference or risk?
  • Do you shop for the cheapest money or the most money?
    • Cheap money is credit or collateral based
    • The most money typically costs a lot
  • Or … can you plan your cash flow in a way that meets your needs without borrowing?
    • Isn’t it best to solve your working capital problem and not guess?

Face it: Working capital is always a challenge and you’re bombarded by adds and offers … so what do you do? Do this right and you’re off to the races … but choose the wrong way to do this and misery will be at your side for who knows how long so let me ask you a question:
Does it seem that some sources are just out to sell you money? If so: Why create two problems by borrowing? Borrowing has it’s place but if you have a cash flow challenge wouldn’t it be smart to solve it without creating debt … or better yet: Without creating another burden to your cash flow?
REMEMBER: When you borrow you have to pay it back – end. We know: When you borrow and you get that deposit in your account it’s a rush … but then the payback starts.
The quick cash advance loans are attractive – and they do have their place because I have provided these to clients in special situations – but in the wrong application once they start taking out those small incremental payments they add up … AND THEY DON’T GO AWAY UNTIL YOU ARE PAID IN FULL!!!
If your sales are solid and you’re just not getting paid fast enough to meet your obligations credit card processing is something to consider but if you’re commercially oriented consider invoice factoring because not everyone has the capacity to pay via a credit card.
The funny part is that in Europe and Asia factoring is almost a way of life. Over the past 25 years here in the US it’s become a very sophisticated way to monetize a business without borrowing (remember that part: “Without Borrowing“.) Add to it that a solid factoring company does all your credit work for you and lets you appear like you have a professional receivables management arm in your young company – and many of them do exactly that: Act as an extension of their clients resources!
So: What is best for your business?

  • Debt?
  • Personal Guarantees?
  • Quick cash … with debt to follow?
  • Unlocking the equity in your receivables without debt – or personal guarantees?
  • Being able to grow sales without borrowing and without limits?

We welcome your input and hope you’ll consider giving us your feedback … and as always if we can help you further understand how best to capitalize your business our blogs and papers try to offer objective information so we hope you benefit from them! As always: We’re here if we can answer any questions …
Ernie Brown  Principal, Business Funding Northeast