Overcoming Small Business Cash Flow Issues

When it comes to entrepreneurship, running a small to medium sized business (SMB) can be challenging and demanding. This is because a single unexpected emergency, overpaying your taxes or a missed loan payment can drastically impact cash flow. As a result, business people may be making a small profit, but still be behind on payments or lack the financial resources to expand their business. This is a guide shows several ways to improve your tax situation and below explains how to improve cash flow by improving the reliability and liquidity of cash flows.


Financial Assessments

Improving cash flow is only possible if the business owner knows how much liquefiable cash they have available at all times. There are many standard cash flow calculation tools, some are online and others are software programs, but they all that make it easy to verify that the company has enough financial resources to make payments, purchase equipment and pay staff. Standard accounting software programs now come with reporting functions that can produce comprehensive and customized reports that improve the quality of business decision making. As an added bonus, being able to present accurate financial reports will make it easier to attract investors or business partners.


Non-Bank Capital Partners

Most small businesses want partners because they strengthen the cash management cycle and can help cover potential cash shortfalls. Because banks are heavily regulated and have high standards, securing a commercial loan can be a lengthy and bureaucratic process with limited results. Instead, many business owners seek non bank partners in order to improve cash flow and expand the business. These financial partners will be more willing to make reach mutually beneficial terms, such as loans at reasonable interest rates or acquisition of company stock, because they have the flexibility and the resources. Some of the more sophisticated lenders will have exclusive offers and real-time market data needed to match the needs of individual clients.



In the beginning, interest rates and equity requirements may imply that one option is better than the other, but an in-depth assessment of the detailed requirements may paint an entirely different picture. It is only after gaining a full understanding of current and future market conditions, as well as the project requirements, that the best choice can be identified. Therefore, business owners should thoroughly examine the pre-sales requirements and corresponding assumptions, feasibility comparison and profit and cost reports. After they familiarize themselves with the resulting financial data, business owners will be prepared to make sensible decisions and can properly plan for the future.


Leverage Assets

The question of how to manage cash flow in small business may come down to assets and collateral. For example, finance for construction industry projects may be partially awarded based on the company’s ability to qualify and secure loans. Property and equipment may be used as collateral in order to secure a loan that is used to build a new facility, move to a larger office space or buy technologically advanced tools. Financing through a private party may make it easier to make such purchases because business owners payment plan options are available, which is better than making one massive payment. As a result, constructions companies can save their cash so it can be used for other vital business activities, such as covering bills or unexpected industry slowdowns.


As a final note, entrepreneurs may be able to use their own money to temporarily increase cash flow, such as through using a personal credit card or cashing out a retirement account. However, many business owners seek favorable loans from external parties because they can request flexible repayment terms and enjoy unique benefits.

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