Many businesses experience revenue swings during certain times of the year. During some months business may be booming, while in other months sales are so slow that it’s hard to pay the bills. Seasonality like this requires careful management of cash flow to enable companies to remain afloat. Here are some ways you can boost cash flow during difficult times.
Take Out a Short Term Loan
Short term loans can not only help you stabilize cash flow during slack seasons, but they can also enable you to take advantage of unexpected opportunities for growth. These loans usually offer smaller amounts of funds and shorter periods for repayment.
Use Credit Cards
Business credit cards can help see you through times of emergency and periods when sales are slack. They offer the additional advantage of points, miles, cash, and other rewards depending on how much you use them. However, maintain caution in spending, and watch out for interest rates and annual fees.
Establish a Line of Credit
Traditional loans require you to borrow and pay interest on a lump sum, but lines of credit make available a set amount of funds that businesses can draw from in times of need. You only pay interest on the amount you borrow, and when you repay it, the funds are available to you again.
Finance Your Invoices
It is important to understand the difference between invoice financing and invoice factoring. When you factor your invoices, you sell them to a factoring company for a set amount of funds. The factoring company then takes over collection of the unpaid accounts receivables. However, invoice financing involves establishing a revolving credit line based on your unpaid invoices.
Obtain a Cash Advance
Cash advances are easy to obtain but expensive in terms of interest rates. However, they have the advantages of having no fixed payment terms and being unsecured. Before you obtain a cash advance, be sure that you are thoroughly familiar with its terms.
For more advice on boosting your business’s cash flow during a crunch, contact First Source Capital.