When cash is tight and bills need to be paid, your first instinct may be to try to get a small business loan of some kind—any kind. But depending on the type of small business financing you’re seeking, you may need strong personal or business credit scores, or sufficient revenues or cash flow. Without them a loan may be out of reach.
What else can you do? Here are some alternative strategies for improving cash flow quickly and getting more money into your bank account.
Getting paid quickly means you can get money in your account faster—and in turn pay your bills on time. Here are some ways to do that:
1. Collect outstanding invoices
If you’ve been too busy running your business (or drumming up business), you may have any number of clients that owe you money. Set aside some time to dial for dollars. If clients are significantly late and won’t commit to a schedule to catch up, you may want to check their business credit reports to see whether they appear to be having financial problems. If there are red flags, you may also need to contact a collection agency or attorney with collections experience.
2. Factor invoices
Sometimes clients have great credit, but they simply pay slowly; usually because they can. If you do business with reputable clients that take months to pay, you may want to consider factoring some of those invoices. The factoring firm will pay you part of the money you’re owed right away, and you’ll get the rest (minus their fee) when the invoice is paid. In most cases, your client’s business credit history is more important than yours, since they are the ones that will have to make good on the money they owe.
3. Get to the bank instantly
If you find yourself sitting on checks because you haven’t had time to get to the bank to deposit them, ask your financial institution about remote deposit. You’ll be able to use a scanner or your phone to submit a picture of the check and deposit it electronically. Another option: Request electronic or online payment of invoices so the payment will be directly deposited into your business bank or checking account.
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4. Ask for a bigger deposit
If you provide goods or services before your clients pay for them, consider asking for larger upfront deposits. As an added precaution, check your client’s business credit to make sure they are a good credit risk before you offer them longer to pay.
Short of getting a new loan, you may be able to tap other forms of credit to free up cash flow.
5. Tap your business credit card
While paying your credit card bill in full is a great way to avoid interest, there are times when you may need to carry a balance. Credit cards can be a flexible, fast way to borrow in a pinch. Just make sure you factor in the cost of interest, and try to use this strategy only when the cash crunch isn’t likely to drag on too long.
6. Get terms with vendors/suppliers
The companies you buy your supplies from may be willing to extend terms of 30, 60, 90 days, or even longer. This gives you additional time to pay, and it may be interest-free. (Many times companies will check your business credit before agreeing to extend terms.)
7. Refinance debt
Do you currently have outstanding debt? Can you negotiate more favorable terms? Perhaps use a 0% balance transfer to consolidate credit card debt. Lower payments can give you some breathing room, but be careful you don’t dig the hole deeper with a more expensive longer-term loan.
8. Pay strategically
Consider setting up automatic payment on important bills so the bills get paid when they are due, but not too far in advance. Keep cash in your pocket as long as possible. Just keep in mind that if you are trying to build business credit, you can earn a higher D&B Paydex score if you pay debts that are reported to D&B before they are due. (You can check your personal and business credit scores for free on Nav.)
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9. Crowdfund a new project
If you are trying to launch something new, consider crowdfunding as a way to raise additional funds. You don’t need good credit for most types of crowdfunding, but you do need to be able to tell a compelling story.
10. Renegotiate your lease
If you are leasing office space that’s simply too expensive, look into renegotiating the lease or subleasing all or some of your space. Depending on the needs of your business, perhaps you can even look into letting some members of your staff work remotely or move into a coworking space temporarily until things improve.
11. Leaseback equipment
If your business owns valuable equipment free and clear, you may be able to lease it back. This provides you with cash upfront, though you’ll have a lease payment.
12. Deliver faster
If you get paid on delivery, then perhaps you can find a way to deliver faster. For non-physical products (like services) you may need to build better systems. If you are shipping physical products, a logistics expert—or even your shipper—may be able to offer help for speeding up delivery without significantly increasing costs.
Sometimes you just need to bring in money as quickly as possible, and that may mean getting creative in your sales strategy.
13. Offer a discount
If your margins won’t suffer too much, consider offering customers a discount if they pay quickly (or even upfront). You can extend that offer to current customers, new clients, or both.
14. Hold a sale
A sale may allow you to move more product quickly. Again, be careful though—you don’t want to lose money on each sale or get your customers in the habit of thinking that they should always expect a discount, unless that is your normal strategy.
15. Sell old, excess equipment or inventory
Sometimes you need to hold the business equivalent of a garage sale; get rid of old inventory or equipment you don’t need anymore. With this strategy you may not be profitable, but it may be the best way to drum up cash while you offload something that wasn’t going to bring you top dollar in the first place.
16. Hold a sales contest
Can you offer a special incentive to your sales staff to bring in sales quickly? (Again, with an eye to margins and how those sales may impact your organization overall.) Maybe other members of your staff who aren’t directly in sales have good ideas too. Consider a company-wide sales sprint with rewards for those who participate if they meet their target.
17. Offer a referral bonus
Enlist your customers to help you sell your product or service by offering a limited-time referral bonus of some kind if they send new business your way. It could be as simple as a refer-a-friend coupon or as elaborate as a special appreciation event for those who participate.
18. Raise prices
Sometimes a cash-flow crunch is a sign you’re not charging enough. Though raising prices may feel uncomfortable, sometimes it’s the best way to get on financial solid footing. Consider offering your current customers or clients the chance to “stock up” at current prices—another way to bring in some extra cash.
19. Bundle your product or service
Upsell to a more expensive price point by bundling products or services into an irresistible deal. If your customers like what you offer, they may be more than happy to spend more, as long as your value proposition is strong.
Do you really know where your money is going? If you’ve been under pressure lately, you may not realize there are holes in your budget that are leaking money.
20. Do an expense audit
Review your spending carefully, and if you’re not seeing any areas where you can cut back, consider asking an objective third party to take a look. Your local Small Business Development Center (SBDC) provides free consulting, and scheduling a review with your accountant can be an eye-opener as well.
21. Tighten the belt temporarily
You don’t want to scare your staff by suddenly cutting out all travel or company-sponsored meals, for example. But at the same time, they would no doubt prefer to keep their jobs and get a paycheck. Be transparent about the situation and ask them for advice on ways you can tighten the belt for a bit. You can even run a contest for the best ideas and acknowledge staff contributions.