It’s a wonderful thing to think about the incredible profits that your business will have in the near future, but what matters more is how much cash is going in. Cash flow is what keeps your business running. The outgoing and incoming cash will determine how you can sustain your venture. Plenty of potentially profitable businesses go under because they don’t manage their cash flow.
However, there are tried-and-tested strategies that will prevent your business from failing and ultimately improve your finances. The following steps will help you manage cash flow better and put your business to the next level.
1. Keep Your Accounting Up to Date
Take into account all costs and expenses in running your business. Record keeping might be a hassle, but it can help you stay on top of finances. Take advantage of accounting software or apps such as Quickbooks, XERO, or Reckon to manage your finances on the go. If you haven’t got the time to manage your finances, hire a bookkeeper.
2. Plan ahead and Keep a Cash Reserve for Quiet Times
Seasonal trends will affect your business in one way or another. It’s a good strategy to plan ahead for when cash flow slows down. Keep at least three months worth of expenses in the bank at all times (more or less depending on the customer lifecycle of your business). Any more than this, it wouldn’t be an inefficient use of capital. Any less than this, and you’ll be cutting it too thin. If you’re going to take out a part of your reserve for emergency expenses, make sure to put it back in when you get another cycle of cash flow.
3. Set Up a Line of Credit Before You Need One
Having a business line of credit will give you a good hand when there are emergency expenses or contingencies. You can always tap into a line of credit for short-term expenses such as paying contractors, buying inventory, or sustaining daily operations. For bigger expenses like expensive equipment or getting a commercial space, go for traditional loans which will allow you to pay for it in a longer term.
4. Free Up Capital by Leasing Equipment
New equipment has depreciation benefits. The interest in equipment financing is tax-deductible, and you can use the cash you free up to invest in other revenue-generating activities.
5. Get Customers to Pay On time
The best way to boost your cash flow is to make sure that your customers pay on time. Incentivise them to pay on time with early payment discounts or other perks. On the flip side of this is to delay payments to vendors as long as possible to give yourself some leeway. Unless of course they offer an early payment incentive.
6. Match Receivable to Payables
Take a look at the payment terms of your suppliers or contractors, and the payment terms of your customers. If your suppliers require you to pay earlier than you require customers to pay you, you’re creating a gap in cash flow.
Match your supplier’s terms of payment to your customer terms of payment. When it’s time to pay your suppliers, at least you’ll be able to cover it with incoming cash from your customers.
Take note of the penalties that your suppliers charge for late payment. Can you also apply it to customers who pay late so that you can make up for supplier penalties? Late payment charges can be an incentive for customers to pay on time, the same way that you can also pay your suppliers promptly.
7. Supplement Your Income During Slow Months
You can also seek out alternative business options during the slower parts of the year. What else could you offer to your market when an item is off-season? What other services can you provide which will complement your main offerings? Diversify into off-season alternative products or services so that you can keep earning even if it’s not your peak season.
You can also collaborate with other businesses to offer off-season deals to customers. Another tactic is moving your sales online, so that you can cater to national or international customers besides your usual local customers.
To further supplement your income, consider saving some of your profits in interest-earning accounts. From this you can keep your money growing even if you’re not using it for working capital. Part of your savings can also go to stocks or mutual funds, which will grow your money as passive income. Having different income streams in the form of active income from your business and passive income in other investments will give you various opportunities for financial growth.
If you need working capital for business without having to touch your cash reserves, go for unsecured business loans. The loans require no collateral on your part. Quotes take less than a minute and the funds can be in your account in 24 hours. Check out Bizzloans for quick funding approval across 800 financial products.
No Security Necessary
The main thing that makes unsecured loans more attractive than secured loans is the fact that they’re no security. It might be an obvious thing to highlight but it clearly matters. You won’t be weighed down by the pressure and worry associated with having collateral hanging over you and potentially being lost to the lender if you fail to make repayments. If you don’t want to take the risk of losing your collateral, you just need to opt for an unsecured loan instead. It’ll allow you to avoid any risks associated with secured loans.
Build Up Your Future Credit Score
By taking out a loan and then paying it off on time, you will help to build or repair your credit score. Many companies are dealing with poor credit, but by taking out an unsecured loan with a lender that is happy to lend to companies with poor credit, you can start to turn the situation around. Meeting regular repayment deadlines shows the world that you are able to stay on top of your financial obligations and pay off the money you owe, and that will only help your business going forward.
Why Your Business Might Want to Take Out an Unsecured Loan
There are lots of reasons why your business might take out a loan, as well as reasons not to. You shouldn’t take out a loan to cover running costs, but if you want to do other things, such as the things we’re going to discuss below, an unsecured business loan can be ideal.
Grow and Expand
Most entrepreneurs have big plans for their businesses. They want to ensure that their business is one that’s got a bright future. So if the time has come for you to grow and expand your business, you should think about whether taking out an unsecured business loan might help you to do that. It could be exactly what you need to get your business moving in the right kind of direction. It takes money and investment to grow your business and a loan might just be the ideal solution.
Take on More Clients and Customers
If your business doesn’t currently have the resources to deal with more customers and clients, it could be time to scale things up. However, that’s something that costs money, whether you like or not. Taking out an unsecured business loan could help improve the resources your business has available. It could mean hiring more people so that you have the human resources needed to take on more clients and make more customers happy. The loan will cover the costs associated with doing that and it’ll pay for itself if you’re able to improve your profits as a result.
Fund a New Marketing Campaign
Maybe it’s the case that attracting new customers to your business is where your problems lie. It’s not always easy to get your voice heard and make people aware of why they should be taking notice of your business. An unsecured loan could be used to fund a new marketing campaign that gets your message out there and makes more people interested in your business and what it’s offering. So if you have an idea for a marketing campaign that you think might work but you don’t have the financing for it, consider a loan.
Improve with Fewer Risks
The chance to improve your business in the many ways mentioned above offers you a real opportunity that you might want to grasp. Secured loans can offer the same access to financing but come with more risks to your business. With an unsecured loan, you can reap all the rewards that come with having the cash to invest in your business without having to worry about the risks adversely affecting the business in the future. The chance to improve with fewer risks attached to that chance should not be ignored or dismissed.
The Requirements for Getting an Unsecured Business Loan
There are some requirements you’ll need to be aware of before you take out an unsecured business loan. These aren’t too harsh or restrictive at all, but they are important.
24 Month Limit
When you take out an unsecured loan from Bizzloans, you have to pay the loan back within 24 months. That’s the maximum repayment term that’s on offer. Of course, that won’t be a problem for the vast majority of businesses out there. It’s important that you look at the finances closely and decide for sure that this is something your business is going to be able to do. You’ll have a chance to do this when you get a quote from us, so you’ll know exactly what you’re signing up to.
Business Bank Statements
To ensure your business is in a financial position to take on a loan of the size you’ve applied for, you’ll need to simply submit your business’s bank statements. This allows us to ensure that we lend responsibly and don’t burden you with a debt that is too much for you to take on. It’s in both your best interests and ours that you’re able to handle the loan that you take on.
To ensure everything is correct and proper, and you are who you say you are, you have to submit a photo ID. This is common practice and ensures that all financial transactions are above board and in order. It’s very easy to do and needn’t be a headache for you. Once we are satisfied with your application, you’ve provided the bank statements and we’ve checked your ID, it won’t be long before you have access to the loan you applied for.
Getting an unsecured business loan for your company could be just what it needs right now. It’s a much safer option than taking out a secured loan and you’ll be accepted much faster. Don’t hesitate to get in touch with us here at Bizzloans if you’re thinking of taking out an unsecured business loan.