Your working capital is one of the most important numbers to keep track of while managing your business. It is the value of your current assets minus your current liabilities. In this case, “current” means that you can access or will have to pay in the next year. Without this buffer of capital, you could find yourself in a cash flow crisis even if your other financials are in good shape.
Fortunately, you can get financing to give your business a boost when it needs it. This helps to ensure that you have enough cash on hand to deal with expenses. These are some tips for securing this financing:
1) Know Your Numbers
Perhaps the most important element of protecting your cash flow is knowing how much capital you have. If you are flying blind, you will be surprised when you don’t have enough liquid assets to cover your liabilities. This will also help you with borrowing because you will have more of the information that lenders need.
2) Leverage Credit Cards
Business credit cards can be a great way to protect your cash flow. They let you spread out expenses across a greater period, meaning that you can ensure that more of your current assets are available to cover current liabilities. While this won’t fully correct a cash flow crisis, it can help to give you more control.
3) Get a Line of Credit
A line of credit is one of the best ways to better manage your cash flow. It lets you borrow money when you need it. Then, you can pay it back when your cash position is stronger. It is similar to using a credit card, but better designed for business capital needs. Additionally, you can use a line of credit to help with major purchases, even if you don’t need immediate capital/
4) Ask Vendors for Credit
Sometimes you can get credit terms from your vendors. This will help you to spread out your current liabilities. Typically, terms are around 30 days. In some cases, you may be able to get terms of 90 days or more. This may not help with the next year of capital requirements, but it can give you added control and flexibility.
Discover more about working capital and how you can avoid cash flow crises. The better equipped you are to manage this, the stronger your business will be.