Cash flow is the lifeblood of a business, but many small and medium-sized businesses frequently find themselves on life support. FundThrough explores the causes of these cash flow shortages and breaks down the options every business should consider to mitigate their chances of being caught off-guard.
When a business says they don’t have any cash on hand, it’s like someone telling you they don’t have air in their lungs. Cash flow is the lifeblood of a business, but many small and medium-sized businesses frequently find themselves on life support. Even worse, it’s often through no fault of their own.
Let’s say the worst happens, and you find yourself with a primary cash flow shortage. First, it’s important to understand exactly what a cash flow gap is. A cash flow gap can be defined as the time between inflows and outflows of capital for your business when the two numbers do not align. An example of this would be when a company makes an investment in inventory for a client order, but then waits for them to pay it back.
As you might imagine, this can pose a tricky situation for small and medium-sized businesses relying on getting paid for their services in a timely manner.
What's Causing My Primary Cash Flow Shortage?
Once a primary cash flow shortage is identified, it’s time to look for a solution. These are a few potential answers that are worth considering should a business find itself with a primary cash flow shortage.
Commercial loans are a trustworthy and time-tested way for a business to raise capital for expansions, real estate deals, or just to keep the doors open. The problem is that getting approved for a loan is easier said than done for a small business. SMBs often lack the credit history necessary to convince a major bank to grant them a loan, and if they do, the process can take upwards of 60 – 90 days. Cold comfort if there are bills and people to pay right now.
Establishing a Line of Credit
Another option available is building a credit line through a bank or other lender. In a pinch, a line of credit can provide the crucial influx of cash necessary to keep things running. The catch is that, much like a commercial loan, getting a line of credit through a bank still takes time and requires many of the same stipulations. That includes an extensive credit history, sources of repayment, and collateral.
Online Invoice Factoring
More businesses are starting to turn toward online invoice factoring as a reliable solution when faced with short or long-term primary cash flow shortages. This convenient form of financing is easy to apply for and doesn’t require SMBs to jump through nearly as many hoops as other options. Because the receivables have already been invoiced, it’s not a matter of if the business can repay the financing, it’s merely a matter of when. FundThrough helps fill cash flow gaps to keep small businesses afloat by getting SMBs the money they deserve, fast.
Primary cash flow gaps can happen to anyone. Even the best laid plans and most sound business strategies can be waylaid by a PO operating on a 90-day net. That’s no reason for a small or medium-sized business to find itself in dire straits. Sign up with FundThrough today to learn how you can fill your cash flow gap in as little as one day.
Put FundThrough to work for your Business
Whether you regularly update your bookkeeping software or only pop in every so often to reconcile your accounts, learning how to record factoring transactions in
Small business owners have more forms of financing available to them than ever before, including invoice factoring, also sometimes known as factoring receivables. Whether you’re