Thursday, May 28, 2015

Getting cash

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     to help you better manage your small business.

     Getting cash into your business is an on-going problem. Customers pay for goods and services, but the cash flow always seems to lag.

     Everyday concerns are one thing. Long term growth presents an even bigger problem. There is a difference between money to operate today and money to grow tomorrow.

     Loans from banks can be hard to get. Loans from friends and family can present other problems--if you go this route, always have a business plan and always write a contract.

     Private investors are another source. Many people make investments in stocks and bonds. Some of these people might be open to considering investing in a local small business. With either a loan or a partial ownership in your business, you might be able to attract them with a better return than they could realize otherwise. 

     Other methods are available. (1) Credit cards can provide flexibility, but interest can be high. They are not a long-term solution to getting cash. (2) Some businesses can factor receivables. This, too, can be costly, but you might be able to bump up your selling prices to cover. (3) "Borrowing" from your suppliers by negotiating longer payment terms--by the time their invoice arrives and has to be paid, you have sold the goods and have the cash to meet the payment. (4) "Borrowing" from your clients and customers by selling gift certificates--some of these will never be redeemed. (5) "Borrowing" from customers who buy your custom manufactured products by having them pre-pay for future delivery. (6) Have your customers make work-in-progress payments--common in certain industries (printing, landscaping, construction, machine shops). (7) Sell on-going maintenance and repair contracts--the cash comes in on a regular basis, whether or not you are called on to perform.

     Getting cash into your business requires constant attention. Healthy cash flow means you are building for the future. 

     You'll need a business plan to get the bigger loans you'll need for future growth. Healthy cash flow in your business provides a solid foundation for that business plan.   

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