Cash is king in the business world. If you don’t have the capital to keep operating, it doesn’t matter how much your assets are worth. That is why working capital is such an important number for companies. It is the difference between short-term assets and short-term liabilities. Sometimes, you need a little help in increasing that number. These are six solutions for getting some extra funds.
1) Collect More Efficiently
One of the reasons that many companies lag on their short-term assets is a slow collection process for accounts receivable. Consider looking into ways to collect more efficiently from customers. Try making it easier for them to pay. Also, pay attention to who is slow at paying. You may want to rethink your payment terms with those customers.
2) Factor Invoices
Another solution for getting money out of your receivables is to factor them. In this arrangement, you either borrow against your invoices or sell them to a lender. You get money now that is repaid when the customer pays.
3) Request Deposits
Think about asking your customers to pay deposits in advance. This is a simple way to ensure you have the money to deliver on orders. Strongly consider this if you need to buy supplies to fulfill an order. If you have any slow-paying customers, you could amend your payment terms to require a deposit.
4) Get an SBA Loan
The Small Business Administration offers special loans for small businesses. These have better acceptance rates, terms, and amounts that normal loans. However, they can be a slow process, so start soon. Talk to your bank or lender to learn if they offer SBA loans.
5) Use a Peer-To-Peer Lender
As a faster borrowing solution, consider a peer-to-peer loan. In this arrangement, you borrow directly from another organization or individual with funds. Typically, these loans are facilitated by a finance business.
These five strategies can help you grow your working capital. Some of them are faster than others. However, it is best not to wait until you find yourself in hot water. Think about making some changes today to optimize your cash flow and ensure you have more short-term assets on your balance sheet.