“Life is the topic; money is the tool” and “If cash is the king, cash flow is the queen.” There is a reason why these two phrases are immensely used in the small business world. We are not dismissing the importance of a strategic business plan; it is improbable to transition it into reality without the aid of money. Forgive us for giving you the reality check but with a zero balance, you can’t glam your small business. Zero bank balance is the result of poor cash-flow management. Managing cash is important as the net amount depicts the financial health of your business. As a manager, it is your duty to monitor, analyze, and streamline every penny that goes in and out of your small business. Sometimes, business owners get lost in other mandatory operational tasks that they forget to monitor the cash flow. So what other option do you have? Rely on external funding which includes traditional and alternative loans.
Business owners apply for cash financing to fill the financial gap so that they are able to take steps that can help the growth of their businesses. When the number of sales increase, cash flow increases as well. Before we jump to the five ways you can use a small business loan to manage your cash flow, let us pen down some of the types of small business loans that have proven to be the best way to manage the cash flow.
If you need money because you want to invest in a big project to streamline the cash flow, then a term loan is the best funding option for you. With incoming cash, you wouldn’t have to worry about insufficient cash flow. In addition to this, the approval process of the term loan can’t get simpler! Once, the lender approves your loan application; the borrower will have access to the funds in two to seven days. A term loan gives you can access to $200, 000 to $1 million, and the borrower is obligated to make weekly, monthly, and daily payment.
A term loan offers the working capital to the small businesses so that they can cover the operating cost.
Business Lines of Credit
If you run a seasonal business and find it hard to manage the cash flow during the off-season, then a business line of credit would be an ideal funding option for you. Applying for the loan repeatedly can hurt your credit score so applying for a line of credit is the safer option. As compared to the business credit card, a line of credit has a lower interest rate. With access to money, you can pay off the vendor and get the supplies on time.
Merchant Cash Advance
If you are facing cash flow problems and have a ‘poor’ credit score, then a Merchant Cash Advance would work for you. More importantly, if you run a retail store, then it means that you have customers coming in and paying with the credit card. This would be ideal funding for you because the lender will take a small percentage of your future credit card sales and the borrower does not have to worry about following the payment schedule.
With money from small business loans, you can carry out following alterations in your small business:
- Upgrade the inventory
Running a small restaurant with worn-out equipment can be frustrating and most importantly it slows down your business growth. So, if you are experiencing any cash flow problems, you can apply for equipment financing and with extra cash flow, you can buy the printer that you have always wanted. Or upgrade your regular refrigerator to the commercial refrigerator and serve best with your customers.
- Brick and click!
If you run a physical store, then you should spend the loan money to open a virtual store. Let us say you run a clothing store, so your customers would love to look at the design via their mobiles and then if they want, they can pick the article in person. So, apply for a term loan and use the funds to hire a web designer so that you have a virtual presence.
- Increase your workforce.
An unhappy customer is not a good sign. Make sure your store has enough helpers or assistants to cater to the needs of every customer. Use the loan to hire and train extra an additional force of people. Arrange and organize extra training sessions so that your team is up to date and knows best!
- Open another store!
Is there any better way to use a loan to open another store to increase the cash flow? If you think your business is doing well, then you should invest the money in opening another store. However, before taking such a huge step you should do market research so that it does not turn out to be a failure. Calculate the numbers and take the right step!
- Save for the rainy day!
Save the funds from the loan for hard times. At times one needs instant funding and waiting for loan approval is not an option. So having some extra funds in your back pocket is always helpful. Whenever a golden opportunity presents itself you have funds to take benefit from it.
We have mentioned some of the funding options, but focus on how you will be using the loan. Pay attention to the above-mentioned steps and say goodbye to the cash management problems. For more tips and tricks on cash flow and small business loan, you can follow us on Twitter (@Onlinecheck) and Facebook (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer your every question and guide you throughout the way.